“Simplification of the onboarding process and rationalisation of ongoing regulatory compliances are expected to further help in facilitating investments by FPIs in IGBs,” said SEBI in its consulting paper issued on May 13.
Under the current Foreign Portfolio Investor (FPI) regime, investors must undergo extensive registration and compliance procedures. However, SEBI notes in its consultation paper that many of these requirements are not relevant for those investing exclusively in government securities.
” This (proposal) includes exemptions from disclosing investor group details and relaxed KYC norms, aligning with RBI standards. The proposal also allows NRIs, OCIs, and Resident Indians to contribute to IGB-FPIs without existing investment caps, potentially increasing investor participation and fostering greater participation in government securities,” said Prashant Mishra, Founder & CEO of Agnam Advisors.
The move follows the growing foreign interest in Indian debt markets, particularly after India’s inclusion in major global bond indices. As of March 2025, FPI holdings in FAR-eligible securities crossed ₹3 lakh crore.
“India’s inclusion in major global bond indices is expected to attract significant passive inflows, and SEBI’s move to ease norms for IGB-FPIs makes it more straightforward for foreign investors to access Indian government bonds. This could lead to increased foreign participation in India’s debt market, enhancing liquidity and potentially leading to more stable long-term capital inflows. SEBI’s initiative comes at a strategic time to attract foreign capital seeking higher yields, thereby strengthening India’s position in the global debt market,” said Mishra.