Inclusion of Indian Bond in JPM EM Global Bond Index Spells 'License To Grow'

"Bond, James Bond" has to be without a doubt the most iconic and popular dialogue in the history of world cinema. Nonetheless, in the world of finance, it's not about Agent 007 with the 'license to kill' but rather the financial instrument, the bond. Vaishnavi Chauhan explains how the recent news about bonds will impact the turns of the future market scenario

- Vaishnavi Chauhan

Recently, Indian government bonds have been included in the JP Morgan Government Bond Index – Emerging Market (GBI-EM) starting June 28, 2024. This process will unfold over 10 months, and conclude on March 31, 2025. Initially, India will have a 1 per cent weight in the JP Morgan EM Bond Index, which will gradually increase to 10 per cent over this period. This inclusion is anticipated to bring USD 20-22 billion in inflows into the Indian bond market.

Not All Bonds Are Equal When we talk about bonds, there are various types. Which ones are included in the JPMorgan Emerging Market indices? Only Indian government bonds issued by the Reserve Bank of India (RBI) under the fully accessible route (FAR) will be included. All FAR-designated Indian government bonds (IGBs) maturing after December 31, 2026, will be included. Investing in government securities has become much easier for non-resident Indians (NRIs) through the RBI retail direct platform. This platform offers several benefits, such as no brokerage fees, commissions, annual maintenance fees or account opening charges.

The RBI introduced the fully accessible route on April 1, 2020, allowing non-residents to invest in specified government bonds without restrictions. This initiative, announced in the budget, opens certain categories of government bonds fully to nonresident investors, eliminating investment ceilings for eligible participants. FAR operates alongside existing investment routes, such as the Medium Term Framework (MTF) and the Voluntary Retention Route (VRR).