FTSE Russell delays India's inclusion in government bond index

FTSE Russell bond index: Global index provider FTSE Russell announced the postponement of India's inclusion in its government bond index due to various issues concerning taxation, registration, and settlement. 

The decision contrasts with the recent announcements by two other major index providers regarding India's inclusion in their respective indices.

FTSE Russell acknowledged progress in the accessibility of Indian securities in its March review for the FTSE Emerging Markets Government Bond Index (EMGBI), maintaining the bonds on its watch list.

Despite improvements, challenges such as regulatory reporting, inflexible settlement cycles, and tax clearance processes persist, hindering the bonds' qualification for the desired "Market Accessibility Level of 1".

The index provider plans to continue dialogue with the Reserve Bank of India (RBI) and gather feedback from international investors entering the bond market to address practical concerns. 

The development follows the inclusion announcements by JPMorgan and Bloomberg Index Services, scheduled for June 2024 and January 2025, respectively.

While government bonds have attracted major foreign inflows in recent months, the anticipated inflows from FTSE's inclusion were not expected to have an immediate impact, given the stringent criteria and comparatively smaller quantum of inflows. 

Analysts project major inflows following inclusion in the JPMorgan and Bloomberg indices.

India has remained on FTSE's watch list since March 2021, with the index provider deferring inclusion in its September review due to unchanged areas of improvement highlighted by foreign investors.

(With Reuters Inputs)