India said to plan to let foreign funds buy more company debt


NEW DELHIIndia’s government is planning to allow foreign investors to increase purchases of the nation’s corporate debt, a person familiar with the matter said.

The cap on foreign portfolio investments may be raised by US$5 billion (RM21 billion) to US$10 billion, the person said, asking not to be identified citing rules. Overseas money managers, attracted by strong returns, have already bought more than 99% of all the Indian sovereign and corporate notes they’re allowed to purchase.

The prospect of a return to worldbeating economic growth following a tax overhaul by Prime Minister Narendra Modi is attracting credit and equity investors. Foreigners own about 7.5% of India’s government and corporate debt, compared to 30% in Indonesia and Malaysia, Aberdeen Asset has estimated. China has also stepped up efforts to draw overseas investors to its debt market, starting a trading link with Hong Kong in July.

In July, foreigners bid for 104.42 billion rupees (RM6.79 billion) of corporate debt quotas, exceeding the 74.18-billion rupee target and taking inflows to near the overall cap of US$51 billion.

The increase in the quotas is likely to be staggered, according to the person. Masala bonds — notes issued outside India but denominated in rupees — are likely not be included in the quota and may have a separate limit, the person said, adding both the central bank and the finance ministry have agreed for a carve out. — Bloomberg