RBI allows more FPI access to Indian bonds, but returns may not lure flows

Treasury officials believe the move may not work as rising interest rates abroad and high domestic inflation have eroded returns from Indian fixed-income assets

The Reserve Bank of India permitted foreign portfolio investors (FPIs) a larger share in Indian debt earlier this week, in a bid to attract more overseas investment flows at a time when the country’s Current Account Deficit is on the rise.

Treasury officials, however, are of the view that the steps may not cause a significant uptick in foreign investment as rising interest rates abroad and high domestic inflation have eroded returns from Indian fixed-income assets.

On Wednesday, the RBI expanded the basket of securities which fall under the ‘Fully Accessible Route’ for FPIs to include 7-year and 14-year