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India is taking steps to reduce the paperwork required for foreign investors to purchase its sovereign bonds, according to a Bloomberg report citing an unnamed source. This move follows a Bloomberg report highlighting foreign investors’ challenges due to the extensive paperwork involved.
This initiative coincides with India’s inclusion in JPMorgan’s emerging market bond index on Friday. As estimated by JPMorgan, this inclusion is anticipated to attract an inflow of $20 billion to $25 billion over the next ten months. So far, global investors have invested nearly $11 billion in Indian bonds eligible for this index. The appeal of India’s bonds is evident as they have been Asia’s top performers, yielding returns of 5.3%, compared to Indonesia’s 1.3 per cent.
The Securities and Exchange Board of India (Sebi) collaborates with the Reserve Bank of India (RBI) to streamline the paperwork process. The common application form currently involves several steps: the RBI’s know-your-customer (KYC) checks to open a bank account, Sebi documentation to open a depository account, and enrollment with the tax department. Sebi aims to eliminate many of its information requirements, such as disclosure of investor groups and beneficial ownership, while retaining the information required by the RBI and revenue departments.
Sebi and RBI initiated discussions to ease these rules in May, and the talks are ongoing. The timeline remains uncertain as changes to the registration forms require a notification from the central government.
India is set to welcome billions of dollars of foreign inflows when JPMorgan adds the country’s sovereign debt to its emerging markets index on Friday, a move that some analysts say will leave it more vulnerable to fickle flows of hot money. The inclusion of 28 government bonds worth more than $400bn will give India a 10 per cent share of the widely tracked measure, according to JPMorgan. $11bn has already flowed into Indian bonds with expectations of a further $30bn to arrive in the next 10 months. This significant move signifies India’s growing presence in the global market and showcases its appeal to international investors.
