Key Takeaways
- • South Korea's National Pension Service (NPS), which manages more than $1.3 trillion in assets and is the world's third-largest pension fund, is seeking a licence to invest in Indian government securities under a compliance-light route offered by SEBI, according to two sources cited by Reuters.
- • NPS is expected to be among the first to apply under SEBI's lower compliance window for foreign investors in government bonds, which would be its first dedicated government-securities-only vehicle in India.
- • Under the new route, sovereign wealth and pension funds need to submit documentation only every 10 years, versus every three years previously, and do not have to disclose end-investor details.
- • Foreign holdings of Indian government bonds are close to 4 trillion rupees ($41.75 billion), while pension funds hold just 469 billion rupees, highlighting the room for growth in that category.
- • India's 10-year sovereign yields are about 7%, with T-bills at roughly 5.30%-6%, as New Delhi seeks more stable foreign debt inflows amid equity outflows of nearly $45 billion between 2025 and 2026 and a rupee trading near historic lows.
Summary
South Korea's state-run National Pension Service is seeking a licence to invest in Indian government securities under a compliance-light route offered by the Securities and Exchange Board of India (SEBI), two sources with direct knowledge of the matter told Reuters. The sources said NPS will be one of the first to apply under SEBI's lower compliance window, which covers foreign investors investing only in government bonds. The sources declined to be identified because the discussions are private. Email queries to NPS and SEBI were not answered.
The move comes as India seeks to broaden foreign participation in its debt market and diversify funding sources. Equities have typically dominated foreign portfolio flows into India, but investors have sold nearly $45 billion of equity between 2025 and 2026 so far, increasing the focus on bond inflows. Foreign investors have put $14 billion into government bonds over the past year and this year. The rupee is trading near historic lows against the U.S. dollar, and India's 10-year sovereign yield of about 7% and Treasury bill yields of roughly 5.30%-6% compare favourably with many developed-market government securities.
Under the new window, low-risk investors such as sovereign wealth funds and pension funds need to submit documentation only every 10 years, compared with the previous requirement of three years, and they are not required to furnish end-investor details as equity and corporate bond investors must. One source said the window was opened to ease the process for pension and sovereign wealth funds, which tend to prefer Indian government bonds, and that such investors are showing rising interest. Unlike several major markets where overseas investors can access government bonds with limited upfront registration, India still requires registration and documentation establishing identity and eligibility.
NPS already invests in Indian securities through 33 offshore funds run by different managers, but most of that exposure is in equities. A dedicated government-securities vehicle would create a separate channel for a larger allocation to sovereign bonds, the second source said. Foreign holdings of government bonds are close to 4 trillion rupees ($41.75 billion), according to clearing corporation data, while pension funds hold a comparatively small 469 billion rupees, per National Securities Depository data. Foreign investment is concentrated in longer-dated benchmark securities rather than short-term instruments.
The move comes as India seeks to broaden foreign participation in its debt market and diversify funding sources. Equities have typically dominated foreign portfolio flows into India, but investors have sold nearly $45 billion of equity between 2025 and 2026 so far, increasing the focus on bond inflows. Foreign investors have put $14 billion into government bonds over the past year and this year. The rupee is trading near historic lows against the U.S. dollar, and India's 10-year sovereign yield of about 7% and Treasury bill yields of roughly 5.30%-6% compare favourably with many developed-market government securities.
Under the new window, low-risk investors such as sovereign wealth funds and pension funds need to submit documentation only every 10 years, compared with the previous requirement of three years, and they are not required to furnish end-investor details as equity and corporate bond investors must. One source said the window was opened to ease the process for pension and sovereign wealth funds, which tend to prefer Indian government bonds, and that such investors are showing rising interest. Unlike several major markets where overseas investors can access government bonds with limited upfront registration, India still requires registration and documentation establishing identity and eligibility.
NPS already invests in Indian securities through 33 offshore funds run by different managers, but most of that exposure is in equities. A dedicated government-securities vehicle would create a separate channel for a larger allocation to sovereign bonds, the second source said. Foreign holdings of government bonds are close to 4 trillion rupees ($41.75 billion), according to clearing corporation data, while pension funds hold a comparatively small 469 billion rupees, per National Securities Depository data. Foreign investment is concentrated in longer-dated benchmark securities rather than short-term instruments.
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