The UK-based bank carried out an Overseas Derivative Instrument (ODI) transaction worth $5 million through the foreign portfolio investment route from its GIFT City branch, the top management of the lender and the International Financial Services Authority (IFSCA) said to ET.
The IFSCA is the regulator of the GIFT International Financial Services Centre.
The transaction involved a derivative instrument referred to as a Total Return Swap which used the five-year benchmark government bond as its pricing reference.
“This assumes significance in the backdrop of the recent announcement of the inclusion of Indian government bonds in the JP Morgan GBI EM indices, as interest from non-resident investors to access the Indian bond market is expected to increase manyfold in the months ahead,” said Zarin Daruwala, Cluster CEO India & South Asia Markets at Standard Chartered Bank.
In the Finance Act, 2023, the government exempted the income earned by non-resident investors from ODI issued by foreign portfolio investors based in GIFT City. Following the move, in July, the IFSCA released detailed guidelines for ODI-related business.
“This transaction starts the process of moving onshore a market that currently exists completely outside the country. It satisfies one of the core purposes for which the idea of IFSC was conceptualised,” said IFSCA chairman K Rajaraman.Currently, foreign portfolio investment in the general category of Indian government bonds is at only 22.7% of the ₹2.7 lakh crore limit, Clearing Corporation of India data showed. The inclusion of Indian bonds in JP Morgan’s emerging markets index and the possibility of other index providers also making similar announcements are seen as spurring greater foreign investment into the domestic bond market.
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