RBI explores global platforms to boost foreign access to Indian bonds

The Reserve Bank of India (RBI) is reportedly in discussions with three prominent global electronic trading platforms. Sources familiar with the matter disclosed that Bloomberg, Tradeweb, and MarketAxess are being engaged by the central bank to establish an interface facilitating foreign investors' participation in local bond markets.

The initiative comes amid anticipation of increased bond trading volumes following the upcoming inclusion of select Indian bonds in JPMorgan's emerging market debt index scheduled for June. With India's weightage in the index expected to reach 10 per cent by March 2025, the move is poised to attract heightened investor interest in Indian securities.

According to sources, foreign investors have expressed concerns regarding the registration process in India, particularly given the imminent inclusion timeline. Notably, since the announcement in September, foreign investors have netted approximately Rs 70,000 crore in government bonds. However, the majority of these investments have been channelled through large investors directly or via foreign banks.

"The major issue is for passive investors who will have to increase exposure to local bonds on a monthly basis," noted a trader from a foreign bank, emphasizing the need for a more streamlined trading system.

Presently, government bonds are primarily traded through the NDS-Order Matching platform operated by Clearing Corp of India (CCIL). In response to market demands, market participants, especially custodian banks managing foreign clients, have advocated for the development of an interface to facilitate seamless trading.

The proposed arrangement aims to ensure smooth settlement of trades through CCIL, instilling optimism within the market regarding its potential execution. "Large foreign banks have had consultations and are nudging the central bank to undertake the link, and the RBI may come out with it soon," added another trader familiar with the matter.

When reached for comments, neither the RBI nor CCIL responded immediately to Reuters' request, underscoring the ongoing nature of discussions surrounding this significant development in India's bond market landscape.

(With Reuters inputs)