Efforts by the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) to attract more foreign investment into domestic debt have yet to yield the expected results. Despite relaxed regulations under the Fully Accessible Route (FAR), overseas inflows into Indian bonds remain below projections. Foreign Debt Inflows Lag Despite Liberalized FAR Rules.
As of 2025, total foreign investment in Indian debt stands at around ₹69,000 crore (US $7.8 billion) — far short of the anticipated US $20–25 billion. Most of these inflows, approximately ₹66,500 crore, have come through the FAR channel, while the broader debt-general category has drawn a modest ₹12,000 crore, significantly lower than last year’s ₹1.1 trillion.
Market analysts attribute the subdued participation to a mix of global and domestic factors. Elevated US interest rates, currency volatility, and moderate Indian bond yields compared with other emerging markets have tempered investor enthusiasm.
India’s upcoming inclusion in major global bond indices and the ongoing regulatory liberalisation were expected to boost inflows. However, experts believe that external market conditions and investor risk appetite will ultimately determine the pace of foreign capital entering India’s debt market, rather than regulatory ease alone.
While the FAR framework offers full access to foreign investors in specified government securities without restrictions, the current tepid response suggests that confidence and return dynamics will need to align more closely before inflows accelerate.
