The process of listing sovereign securities on global bond indices is expected to be completed within 6-9 months and trading will start thereafter.
"So they (funds) have to do KYC, our registration process has to be easier, their registration norms have to be complied with. All of those have to be worked out," a senior government official told Moneycontrol.
In the Budget for 2019-20 (Apr-Mar), finance minister Nirmala Sitharaman had proposed issuing sovereign bonds overseas to raise a part of the government's market borrowing. In Budget for 2020-21, the government announced plans to include Indian government securities on global bond indices.
"If any security is included in an index, then any fund that follows that index has to buy it. Once you are in, everyone who tracks it has to buy it," the official said.
However, there are compliance issues that need to be sorted out before trading in these securities can officially commence.
"So now there are funds that follow an index on which these (sovereign) bonds are listed, but they have nothing to do with India. India's taxation rules for the new bonds have to be clarified. Then say, a Mexican fund sells it to a Canadian fund. Do they have to come back to India or can the countries clear it among themselves? All of these have to be worked out," the official said.
Sorting out all the legal and compliance issues would take a maximum of nine months and then the government would be able to raise its borrowing through these bonds.
"The Indian government has completed all the formalities required to comply with from its end. The only things that requires to be sorted now are certain legalities and compliance issues from global indices," the official said.
The Reserve Bank of India (RBI) in March announced that global funds would be able to buy new five-, ten- and thirty-year bonds from April 1. It had also removed caps on some issued debt including the benchmark. Tenors may be changed or added, it had said.
The announcement to issue sovereign bonds overseas has been controversial since its inception. The officer whose brainchild it was, former economic affairs secretary Subhash Garg, was shifted out of the finance ministry a day after Parliament passed the Budget for 2019-20.
Apart from the Prime Minister's Office and the Reserve Bank of India (RBI), Ashwani Mahajan, co-convenor of the Swadeshi Jagran Manch, an economic policy group linked with BJP, had said foreign debt would increase inflation threats.
In order to include government securities on global indices, the RBI scrapped the limit on foreign investment in securities that are identified for inclusion in such indices.
There were also reports that the government was planning list Indian G-Secs on the Bloomberg Barclays Global Aggregate Index and the JP Morgan Government Bond Index.
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