The Centre on Friday announced a series of reforms aimed at deepening India’s Government Securities (G-Sec) market and making it easier for foreign investors to participate in both equity and debt markets. The measures include liberalised investment norms for overseas individuals, expanded access to government bonds, and tax exemptions for foreign portfolio investors (FPIs) investing in government securities.
The Ministry of Finance said the reforms are intended to strengthen India’s position as a global investment destination, simplify market access and attract stable long-term foreign capital. The measures build on earlier capital market reforms and are aimed at improving the ease of investment for Persons Resident Outside India (PROIs) and FPIs.
As part of the reforms, individual PROIs will now be allowed to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme, a route that was previously available only to Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).
The investment limit for an individual PROI under the scheme has been increased from 5% to 10% in a company, while the aggregate limit for all such investors has been raised from 10% to 24%.
The government said the changes are being implemented through amendments to the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.
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According to the ministry, the move will leverage existing onboarding systems for NRI and OCI investors, reduce compliance requirements and support greater participation by relatively stable individual foreign investors in Indian equity markets.
In the government bond market, the Centre has expanded the list of securities available under the Fully Accessible Route (FAR).
New issuances of government securities with tenors of 15, 30 and 40 years, along with Sovereign Green Bonds issued in eligible maturities, will now be available under the route.
The government has also removed three restrictions applicable to FPIs investing in government securities through the General Route – the short-term investment limit, concentration limit and security-wise investment cap.
However, the overall investment ceiling of 6% of outstanding Central Government securities and 2% of State Government securities will remain unchanged.
In addition, the existing “general” and “long-term” sub-categories of investment limits will be merged into a single category.
The Finance Ministry said these measures are expected to support the development of a smoother yield curve and attract long-term institutional investors such as pension funds, insurance companies and sovereign wealth funds.
To further improve India’s attractiveness as an investment destination, the government has decided to exempt FPIs from income tax on interest income and capital gains arising from investments in government securities.
The exemption will apply to interest and capital gains earned on or after 1 April 2026.
A similar exemption has also been extended to the Bank for International Settlements (BIS) for its investments in government securities.
The ministry said the combined impact of these reforms would reduce operational complexities, simplify investment procedures and broaden participation in Indian equities and government securities, while encouraging greater inflows from global investors seeking exposure to India’s fast-growing economy.
