Government announces measures to deepen the G-Sec market and facilitate greater Foreign Portfolio Investment

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The Ministry of Finance recently introduced a major set of capital market reforms. These changes aim to expand the Government Securities market and bring in more Foreign Portfolio Investment for equities.

This policy is a large macroeconomic reform package. It opens up India stock and sovereign debt markets to global investors.
The primary goal is to make India a top global destination for stable and long-term foreign money.
These changes aim to simplify market access and lower compliance rules. They also help build a smooth long-term yield curve and boost national foreign exchange inflows.

The government amended the *Foreign Exchange Management (Non-Debt Instruments) Rules, 2019* to enable these equity changes.
Individual Persons Resident Outside India can now invest directly in listed Indian equities through the Portfolio Investment Scheme.
Previously, this fast track was available only to Non-Resident Indians and Overseas Citizens of India.
The investment limit for an individual foreign national in a single company increases from 5% to 10%.
The total combined cap for all individual foreign persons in one listed company expands from 10% to 24%.
New investors will use the digital onboarding pipelines of Non-Resident Indians and Overseas Citizens of India for quick setup without extra verification layers.

Authorities are completely overhauling institutional debt-purchasing guidelines to unlock the long-term sovereign bond market.
The government expanded the Fully Accessible Route to include ultra-long-term 15, 30, and 40-year new G-Sec issuances along with Sovereign Green Bonds.
The administration removed operational boundaries for foreign investors working under the General Route.
The central bank and finance ministry permanently scrapped the short term investment limit, the concentration limit, and the security-wise limit for bond dealers.
The overall quantitative ceiling remains steady at 6% for central government securities and 2% for State Government Securities to guard against currency flight.
The separate investment sub-buckets are now merged into a single pool to give fund managers complete portfolio flexibility.

The government introduced a zero-tax regime for foreign institutional money locked in Indian sovereign debt papers.
Foreign portfolio investors receive a complete tax exemption on any interest earned or capital gains generated from Government Securities.
This tax exemption applies to all earnings made on or after April 1, 2026.
Authorities extended this same tax exemption to the Bank for International Settlements to secure high-tier international liquid reserves.
This tax change places Indian bond yields on equal footing with advanced Western and Asian debt markets.