Fully Accessible Route (FAR) : RBI
The Reserve Bank of India’s (RBI) recent decision to exclude new 14-year and 30-year government securities (G-Secs) from the Fully Accessible Route (FAR) may unsettle bond markets, potentially causing yield spikes for these securities.
- Experts warn that this exclusion could erode investor confidence, reduce participation, and increase yields due to diminished foreign portfolio investor (FPI) demand.
- FPIs generally prefer stable regulatory environments, and changes can lead to uncertainty and adjustments in investment strategies.
- Despite this, large domestic investors are expected to absorb the fresh supply of these tenors.
- RBI’s move aims to mitigate the potentially destabilizing effects of large capital flows in fixed-income markets by limiting investments in the more liquid segments.
- The Fully Accessible Route (FAR) regulations impose no limits on investments by Non-Resident Indian retail investors. NRIs can invest in Government Securities both on repatriable and non-repatriable bases, depending on the terms and conditions of the investment scheme.
