RBI in talks to ease foreign investors' trade in securities

Deputy govenor H R Khan said RBI is in talks with market participants

The Reserve Bank of India (RBI) is in talks with the market players for smoothening the process of trading by foreign investors in the Indian debt market.

“We are discussing with various players to see what best can be done to smoothen the process of trading by the foreign investors in Indian securities”, RBI deputy governor H R Khan told reporters on the sideline of Odisha Economic and Banking Conclave, 2014 organised by the Bankers' Club here.

Khan was responding to a query on when Euroclear would be settling Indian debt offshore. “We are discussing on Euroclear. There are quite a few issues. Already, foreign investors are allowed to invest in India for the government securities up to $30 billion. The investment limits included $20 billion for general and $10 billion for long-term investors. However, $5 billion has been added to general investors, taking it to $25 billion,” Khan added.

The reaction from the RBI official comes in the backdrop of reports that India is considering joining Euroclear, the world's largest securities settlement system, with the condition that only long-term foreign investors be allowed to trade in Indian government debt instruments for now.

It may be noted that the RBI had in July this year enhanced the investment limits in government securities available to foreign institutional investor (FIIs) / qualified foreign investors/ foreign portfolio investors by $5 billion by correspondingly reducing the amount available to long-term investor from $10 billion to $5 billion within the overall limit of $30 billion.

“Investments are happening through custodians. Some people want that they should be in a position to trade in a hassle-free manner with less of registration requirement. We are working out how to create a framework so that registration process becomes faster and simpler. But we have to take into account whether it will affect the liquidity in the market,” said Khan.

Replying to a query during the central bank’s post-policy conference call for researchers and analysts, RBI governor Raghuram Rajan had said that the banking regulator was trying to get various systems such as Euroclear or Clearstream engaged in India.

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