Strongest FPI Debt Inflows in India Through FAR in 15 Months in June

In June, there was an abrupt increase in FPI debt investments through the Fully Accessible Route (FAR), and June has witnessed the highest level of debt investment through FAR in 15 months.

FPIs invested $2.2 billion in government bonds under the Fully Accessible Route (FAR) up until June 25. This has been an improvement compared to $0.46 billion in May. The figures also show a change in trend from the earlier dull figures of flows being negative, which were at -$1.25 billion in March and -$0.01 billion in April. The total FPI debt investment through the FAR route in 2026 has gone up to $3.81 billion.

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June Drives Majority of This Year’s Inflows

Nearly 58% of the total FAR inflows recorded so far this year came in June alone, reflecting a notable improvement in overseas investor participation.

The June figure is also the highest monthly investment through the route in the last 15 months. Before this, the largest monthly inflow was recorded in March 2025, when FPIs invested $3.34 billion in government securities.

Policy Changes Boosted Investor Interest

The rise in inflows followed a series of measures announced by the government on June 5 to encourage foreign investment in India’s bond market.

The policy package exempted interest income and capital gains tax on FPI investments in government securities made on or after April 1, 2026. The list of FAR-eligible securities was also expanded to include 15-year, 30-year and 40-year government bonds, along with Sovereign Green Bonds.

The changes widened the investment universe for overseas investors and improved access to India’s debt market. Market reports also indicated that a large foreign institutional investor deployed nearly $1 billion into government securities with maturities of up to 10 years during the month.

Tax Relief Improves Bond Market Appeal

Venkatakrishnan Srinivasan, Founder and Managing Partner of Rockfort Fincap LLP, said the recent policy measures have enhanced the post-tax attractiveness of Indian government securities by removing a key hurdle for long-term foreign investors.

K. Arvind, Head-Treasury at Tamilnad Mercantile Bank, said the expansion of the FAR framework and the removal of taxes on eligible investments have strengthened the appeal of India’s bond market for overseas investors.

Srinivasan added that foreign investment decisions are increasingly influenced by India’s macroeconomic stability, policy consistency, market access and post-tax returns rather than only yield differentials with U.S. Treasury securities. These factors are expected to support steady foreign participation in the government securities market over the medium term.