What changed
RBI, in consultation with the government, decided to exclude all new issuances of 14-year and 30-year government securities from the Fully Accessible Route. Existing stocks of these tenors already classified as specified securities will continue to be available for non-resident investment in the secondary market.
What it means for you
Banks and market participants must note that fresh FPI inflows into long-dated G-Secs (14-year and 30-year) will now be subject to standard investment limits and conditions, not the unrestricted FAR. This could reduce foreign demand for new long-tenor paper, potentially impacting yields and pricing for these maturities. Existing holdings under FAR remain unaffected, providing continuity for current portfolios.
What you must do
- Update your G-Sec trading and investment systems to reflect that new 14-year and 30-year issuances are no longer FAR-eligible.
- Advise FPI clients that new long-tenor G-Sec investments must comply with standard limit frameworks (e.g., AP DIR Series Circulars).
- Monitor secondary market liquidity for existing FAR-eligible 14-year and 30-year stocks, as they remain available for non-resident trading.
- Review your bank's own investment and ALM strategies for long-dated G-Secs in light of potential demand shifts.
Who it affects
Primary Dealers, FPIs and non-resident investors, Treasury desks of banks, G-Sec market participants
Are existing 14-year and 30-year G-Secs under FAR still tradable?
Yes, existing stocks already classified as specified securities under FAR continue to be available for non-resident investment in the secondary market.
What limits apply to new 14-year and 30-year G-Sec investments by FPIs?
New issuances will be subject to the investment limits and conditions prescribed in AP DIR Series Circular No. 03 dated April 26, 2024, or Circular No. 22 dated February 10, 2022, as amended.
When does this change take effect?
The circular is applicable with immediate effect from July 29, 2024.