Mumbai: The inclusion of additional government securities under the Fully Accessible Route (FAR) and tax exemptions from the government are expected to improve the attractiveness of Indian debt to foreign investors over the longer term.However, treasury executives said it remains unclear whether the measures will trigger an immediate increase in foreign inflows, given elevated crude oil prices and the ongoing conflict in West Asia. "It is difficult to predict bond inflows, and when the inflows begin will depend on overall geopolitical sentiment. We do expect inflows to come in, but the kind of large-scale flows that some market participants are anticipating may not materialise soon except in deposit schemes," said Alok Singh, head of treasury at CSB Bank.The Reserve Bank of India (RBI) included securities of three additional tenures-15-, 30-, and 40-year papers-in the FAR securities on Friday, with the aim of boosting FPI inflows. All new issuances of 6.68% GS 2040, 7.24% GS 2055, and 7.71% GS 2066 papers will be added to the FAR basket, the RBI said.Following the announcement of a larger FAR universe and tax inclusion, the 10-year G-sec yield rallied seven basis points from its previous close to 6.94% on Friday, but later reversed its gains and closed at 6.97%, versus its Thursday close of 7.01%, CCIL data showed.
FAR expansion, tax relief may boost foreign bond inflows, but risks remain
New government debt rules aim to attract foreign investment. Additional government securities are now accessible to foreign investors. Tax exemptions are also in place. These measures are expected to boost Indian debt appeal over time. However, immediate foreign inflows remain uncertain. Global events like oil prices and regional conflicts influence investor sentiment.













