RBI MPC: FPIs keen on 5-10-year FAR securities, low on 30-year bonds, says Patra

Reserve Bank of India

The Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra on August 8 said foreign portfolio investors (FPI) were majorly interested in 5-10-year securities under the Fully Accessible Route (FAR), and were not so keen on 30-year bonds.

In the post policy press conference, Patra said that out of the total outstanding of 10-year government securities, total FPI holding under various routes is only 4.8 percent.

He added that the central bank observed that major part of the interest of FAR investors is in 5-10-year securities, which accounts for 90 percent of the total investment and the interest in 30-year is just 2 percent of the total stock of 30-year.

All existing securities are available for FAR investment so that makes Rs 41 lakh crore of available investment, of which investment today is only Rs 2 lakh crore, he said.

Patra estimated that the categories which are now allowed there will have Rs 4 lakh crore of new issuances which are open to FAR.

On July 29, the RBI, in consultation with the government, decided to exclude all new securities of 14-year and 30-year tenors from the FAR.

Existing 14-year and 30-year government securities that are available under the FAR will continue to be accessible by non-residents in the secondary market.

Investments by Foreign Portfolio Investors in 14-year and 30-year tenor bonds shall now be under the investment limits prescribed by the Reserve Bank.

Earlier on August 8, the RBI’s Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 6.5 percent. The MPC also kept the stance unchanged, staying focussed on 'withdrawal of accommodation'. The decisions were taken with a majority of 4:2 by the six-member rate-setting panel.

Other rates such as the standing deposit facility (SDF) also remained unchanged at 6.25 percent and marginal standing facility at 6.7 percent. The bank rate was also maintained at 6.7 percent. “There is a good amount of convergence in RBI policy and market expectation,” RBI Governor Shaktikanta Das said while delivering his MPC speech.