SBI-FTSE to create bond index for India

In a significant development for the Indian bond market, State Bank of India (SBI) and FTSE Russell, the arm of the London Stock Exchange, will jointly develop a bond index for global investors to benchmark Indian bond market against that of its competitors.

FTSE Russell, index and data provider unit of LSE, is among the top three fixed income index providers globally.

The index series, named FTSE TMX SBI India Index Series, would be functional by 2017 and would give “market participants from India, the UK and internationally the tools they need to analyse India’s bond market,” FTSE Russell said in a statement on Monday.  

India has been trying to put its bond market in global indices, but the most popular and widely followed index created by JP Morgan demands the country to open up the bond market more for the global investors and ease restrictions like having minimum residual maturity.

Currently, foreign investors can only take a limited position in India (capped Rs 1,48,000 crore for government bonds and Rs 2,44,323 crore for corporate bonds), while the Reserve Bank of India mandates that the bonds invested should have residual maturity of at least three years.

FTSE and SBI had signed a letter of intent last year to create the index that would work as a benchmark for Indian bonds.

The index series demonstrates the “significant progress” in the development of India’s bond market, FTSE Russell said in its statement. Developing India’s bond market is a priority of the India UK Financial Partnership (UKFP), launched by India’s finance minister and the Chancellor of the Exchequer in July 2014.

SBI chairman Arundhati Bhattacharya said the index will “act as a key enabler for foreign investors looking to invest in Indian debt market and will contribute to accelerating the development and deepening of the Indian bond markets.”

Products around the index can be developed that can be used to help build “investment in India, and develop deeper pools of liquidity in the sovereign and corporate bond markets,” said Waqas Samad, CEO of Fixed Income and Multi Asset, FTSE Russell.