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

by BLOOMBERG

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