NEW DELHI/MUMBAI (Reuters) - India is close to allowing sovereign wealth funds to settle government bonds on Euroclear, the world's largest securities settlements system, and is likely to set aside up to $3 billion for these long-term investors, according to two officials aware of the discussions.
One of the sources said the government would for now exclude foreign institutional investors (FIIs), the biggest investor base from overseas in India, as reported by Reuters in August.
A final decision to exclude FIIs would signal policymakers's skittishness about opening up India's debt market too much given concerns about sudden destabilising outflows, even as India depends on these foreign investors to fund its current account deficit.
The officials did not give a more specific timeline on when the government would finalise talks to join Euroclear. Some lingering issues to be resolved include amendments in laws governing foreign investments in bonds and settlements when trades involve a domestic counterparty.
"The SWFs can trade and settle on Euroclear, but if there is any domestic entity as one counterparty then the settlement may have to be done on CCIL (Clearing Corporation of India Ltd)," said one of the officials.
CCIL is India's largest settlement system for government bonds. Both declined to be identified as the discussions, which also involve the Reserve Bank of India, remain private.
Foreign investors have been calling for India to join Euroclear to make it easier for them to access Indian debt.
It does this by removing some of the registration barriers because the financial services company that books the trade, usually a bank, settles and guarantees the trade.
India imposes an overall ownership limit of $30 billion for foreign investors in government bonds, of which $25 billion is geared for foreign institutional investors.
The FII allocation is almost fully used up, whereas long-term investors such as sovereign wealth funds, foreign central banks, pension funds and insurance funds have used up about 71 percent of their $5 billion limit.
yahoo.com
One of the sources said the government would for now exclude foreign institutional investors (FIIs), the biggest investor base from overseas in India, as reported by Reuters in August.
A final decision to exclude FIIs would signal policymakers's skittishness about opening up India's debt market too much given concerns about sudden destabilising outflows, even as India depends on these foreign investors to fund its current account deficit.
The officials did not give a more specific timeline on when the government would finalise talks to join Euroclear. Some lingering issues to be resolved include amendments in laws governing foreign investments in bonds and settlements when trades involve a domestic counterparty.
"The SWFs can trade and settle on Euroclear, but if there is any domestic entity as one counterparty then the settlement may have to be done on CCIL (Clearing Corporation of India Ltd)," said one of the officials.
CCIL is India's largest settlement system for government bonds. Both declined to be identified as the discussions, which also involve the Reserve Bank of India, remain private.
Foreign investors have been calling for India to join Euroclear to make it easier for them to access Indian debt.
It does this by removing some of the registration barriers because the financial services company that books the trade, usually a bank, settles and guarantees the trade.
India imposes an overall ownership limit of $30 billion for foreign investors in government bonds, of which $25 billion is geared for foreign institutional investors.
The FII allocation is almost fully used up, whereas long-term investors such as sovereign wealth funds, foreign central banks, pension funds and insurance funds have used up about 71 percent of their $5 billion limit.
yahoo.com
No comments:
Post a Comment