The latest bond-market data answers a question many investors have been asking: did the government’s tax relief immediately change foreign investor behaviour?
FAR securities moved back into focus after foreign portfolio investors (FPIs) added roughly ₹8,795 crore following the government’s decision to exempt certain foreign investors from taxes on interest income and capital gains from government securities. The change applies to income arising from April 1, 2026, and is aimed at making Indian sovereign debt more competitive globally.
Why did the inflows concentrate in FAR securities? The Fully Accessible Route allows overseas investors to buy eligible government bonds without many of the restrictions that exist under the regular investment route. Government data released alongside the reform showed that FAR already accounts for the majority of foreign holdings in government securities, making it the most direct channel for additional allocations.
Why does this matter beyond the bond market? Stronger participation in government securities can diversify foreign capital entering India. Equity flows often fluctuate with global risk sentiment, while long-duration bond investors such as pension funds and insurance institutions tend to have longer investment horizons.
A less discussed point is the scale opportunity. Official data showed FPIs held about ₹3.21 lakh crore of FAR-eligible securities as of May 2026, compared with roughly ₹54,000 crore through the general route. That means nearly 86% of foreign government-bond exposure was already concentrated in FAR securities before the latest inflow surge.
For shareholders, the development is less about a single day’s bond inflow and more about India’s effort to deepen capital markets. Policymakers have simultaneously expanded the list of securities eligible under FAR and eased several investment restrictions, signalling a broader push to attract long-term overseas capital.
Verify in filings and official releases:
- Net FPI flows into government securities over the coming weeks.
- Changes in foreign ownership of FAR-eligible bonds.
- Any further RBI or government measures affecting debt-market access.
Share this article with investors tracking how policy changes are influencing capital flows into Indian markets.
This article is journalism and educational commentary, not investment advice. The author is not a SEBI-registered Research Analyst. Figures should be independently verified against official filings before any financial decision.
