Will eased KYC norms revive foreign investment in Indian sovereign bonds?
Mumbai: India's regulatory latitude on compliance and
KYC norms for foreign funds
buying only sovereign bonds is expected to burnish the allure of an asset class already featuring in global gauges, although an immediate halt to recent outflows would require worldwide rate dynamics and geopolitical risks to settle in favour of the emerging markets.
"Considering that the Indian economy is growing and the market is coming up the maturity curve with inclusion in global indices, it is quite logical for making the investing route easier for FPIs," said Divaspati Singh, partner at Khaitan & Co.
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According to a senior official at a foreign bank, there has been a long-pending demand to ease the operational issues around reporting and KYC. On Wednesday, Sebi approved the proposal to relax certain regulatory requirements for all existing and prospective foreign portfolio investors that exclusively invest in G-Secs.
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Will eased KYC norms revive foreign investment in Indian sovereign bonds?
India's relaxation of KYC norms for foreign funds investing solely in sovereign bonds aims to enhance the appeal of this asset class, already included in global indices. While easing operational issues is a welcome step, an immediate reversal of recent outflows hinges on favorable global rate dynamics and reduced geopolitical risks. Experts anticipate long-term benefits for FPI participation in G-secs.
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Overseas investors have been shedding Indian bonds of late. Easing of the KYC norms are unlikely to lead to an immediate trend reversal. "While this may not see a sudden spurt of inflows, it does make life easier for FPIs participating only in G-secs," Singh said.
An overseas banker expects long-term benefits from Sebi's move.
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