FPIs pump record funds into G-Secs after policy shift

Daily inflows from foreign portfolio investors (FPIs) through the so-called fully accessible route (FAR) have turned positive in June and are so far the highest on record in this category.

Bankers said the government measures announced on June 5 along with a stable rupee and a calmer geopolitical environment in recent days have contributed to higher FPI inflows into government securities. However, continuation of the momentum will depend on several factors including the geopolitical scenario remaining calm. If India’s sovereign debt is included in major global bond gauges, including the Bloomberg Global Aggregate Index, that would offer a significant advantage.

Agencies

Inflows through ‘FAR’ Turn Positive In June

According to data from the Clearing Corp of India website, FPIs invested ₹33,000 crore so far in June, six times the ₹5,512 crore they invested in May. The previous highest investment in this category in the last one year was ₹12,246 crore in October 2025.

“The de-categorisation of sub-limits, simplifying processes and widening of the list of specified securities for FPIs to invest have clearly spurred these new investments. A better macro environment with issues linked to tariffs, oil prices and also by extension the rupee has given some lift to investor sentiment which are reflecting in these numbers,” said Ajay Manglunia, head of fixed income at Capri Global Capital.

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The government on June 5 announced removal of restrictions such as short-term investment limit, concentration limit and the security-wise limit for investments by FPIs in government securities. Sub-categories of investment limits, viz., ‘general’ and ‘long-term’ were merged into a single limit for investment in central and state government securities, respectively.

More importantly, the government removed taxes, directly enhancing FPI returns. Earlier FPIs faced a 12.5% long-term capital gains tax on listed shares and bonds held longer than 12 months and a 20% withholding tax on interest earned on government bonds. Tenors of 15, 30 and 40 years, as well as sovereign green bonds, were also added to the list of specified securities under the fully accessible route for FPIs.Bankers said the measures have no doubt increased investor confidence, which has resulted in the inflows. But how long the momentum will continue will depend on a variety of factors. “In a way the money that has come now was always on the side lines and was boosted by the tax and other reforms. For more new money to come, we will have to wait and watch on how the macro factors behave in which global factors will also play a part,” said Gopal Tripathi, head of treasury at Jana Small Finance Bank.

There are expectations that Indian securities will be included in major global bond gauges due to the above reforms. Reserve Bank of India and finance ministry officials may reach out to the Basel-based Bank for International Settlements (BIS) for talks on investing into India, ET reported earlier this month. BIS has been given a special tax-exempt status in the latest rejig. BIS invests significantly in government securities and enjoys tax-free status everywhere.