Foreign portfolio investors might be able to invest even more in the Indian bond market soon, over and above the current ceiling of $51 billion. Capital market regulator SEBI is willing to consider raising this upper limit, given the enthusiasm it has seen in the corporate bond market.
Speaking at a conference here organised by ratings agency Crisil, UK Sinha, Chairman of the Securities and Exchange Board of India (SEBI), said, "We have seen a lot of enthusiasm from foreign portfolio investors in Indian corporate bonds. Exemptions in withholding tax have helped and nearly 60 per cent of the investment limit has now been utilised. So there will be an occasion where this limit can be enhanced."
Additionally, he noted that if foreign investors are willing to invest in the domestic debt market, this will help corporates raise money locally. "More participation in the corporate bonds market in India by foreigners also implies that Indian companies won't have to go abroad to raise debt financing. They will be able to raise funds here in the rupee itself."
However, he said that the Indian corporate bond market still has a long way to go before it can be fully developed. This, in terms of liquidity, enhanced bond holder protection, better disclosures to debenture trustees and encouraging more and continued retail participation in the bond market even when the equity markets perform well.