India’s index-eligible government bonds recorded their largest single-day inflow in nearly a year after the Reserve Bank of India (RBI) and the Centre unveiled measures aimed at attracting foreign investment into government securities and supporting the rupee.
Global funds purchased ₹4,490 crore ($469 million) worth of index-eligible bonds on Friday, the highest since June 30, 2025, according to CCIL data compiled by Bloomberg. These securities comprise government bonds designated under the RBI’s fully accessible route (FAR), which allows unrestricted investment by overseas investors.
The surge followed the RBI’s decision to expand the FAR universe by including all new issuances of 15-year, 30-year and 40-year government securities. Simultaneously, the government promulgated an ordinance exempting foreign investors from capital gains tax on investments in Indian government bonds.
Market participants view the twin measures as a significant step towards easing investment frictions for overseas investors and strengthening India’s case for inclusion in the Bloomberg global aggregate bond index, one of the world’s most widely tracked fixed-income benchmarks. Bloomberg had deferred India’s inclusion in January 2026, citing unresolved operational and market-infrastructure concerns.
The measures are also expected to aid the government’s borrowing programme by broadening the investor base for long-duration securities.
“The inclusion of the new tenors along with the full tax exemption implies the post-tax return on G-Secs is now higher, which would lead to more inflows. According to the government borrowing calendar, ₹2.45 lakh crore of G-Secs belongs to the three new tenors, of which around ₹0.9 lakh crore has already been issued. Therefore, about ₹1.5 lakh crore yet to be issued will now become part of FAR securities,” said Soumya Kanti Ghosh, group chief economic adviser at SBI.
Forex swap facility
Apart from measures targeted at government bonds, the RBI also announced a concessional forex swap facility, available until September 2026, to encourage external commercial borrowings (ECBs) by public sector entities. A similar facility has been introduced for banks mobilising 3-5 year foreign currency non-resident (bank), or FCNR(B), deposits, with the central bank bearing the full hedging cost.
Taken together, these initiatives could potentially attract $75-90 billion of inflows, according to market estimates.
Punjab National Bank MD and CEO Ashok Chandra told Reuters that Indian banks could mobilise $35-40 billion through FCNR(B) deposits. PNB itself aims to raise $2.5-3 billion under the scheme.
However, bankers cautioned that the current interest-rate differential between India and the US is significantly narrower than in 2013, when similar measures were deployed.
“Unlike 2013, when the interest differential between the US and India was in the range of 5-6 per cent, compared with 1-2 per cent presently, the relative attractiveness is lower,” said Harsh Dugar, executive director at Federal Bank.
RBI on Monday said that the swap facility for ECBs will be undertaken at a fixed rate of 1.5 per cent per annum, compounded semi-annually.
