Foreign Direct Investments in Government Securities

Net Inflows into Fully Accessible Route (FAR) Securities

• February 2025 saw a total of ₹4,530 crore net inflow so far.
• During January 2025, there was a net inflow of ₹14,430 crore.
• Fresh inflows of ₹9,000 crore on January 31 came right after Bloomberg’s inclusion of India in the Emerging Market Local Currency Government Index.

What is FAR?

• The Fully Accessible Route (FAR) is a framework that permits non residents to invest in certain Indian government securities without restriction on the quantum of the investment.
• It was brought into force by the RBI in March 2020 to enhance foreign presence in the bond market in India.
• Most of the securities designated FAR are eligible for JP Morgan’s Government Bond Index Emerging Markets (GBI-EM-GD).

What is the Structure of FAR?

• RBI designates eligible government securities (G secs) for FAR investments.
• No investment ceilings on eligible investors unlike other routes where ceilings exist.
• Every new issue of 5 year, 10 year, and 30 year G secs will automatically be designated as FAR securities.

Reasons That Prompted FAR in the First Place?

• To improve foreign investment into Indian bonds, improve liquidity, and reduce costs of borrowing to the government.
• To facilitate India’s entry to the global bond indices so that its debt market becomes easily accessible for foreign investors.

Other Routes for Foreign Investments in Bonds

• The Medium Term Framework (MTF)
  • A Foreign Portfolio Investment (FPI) regime for Central and State Government Securities (G secs and SDLs) with specific limits is imposed.
• Voluntary Retention Route (VRR)
  • An arrangement that gives investors flexibility in that they must retain a share of their investment over a certain period.