RBI Panel Favors Extended Hours For Bond Trades By Foreigners

A central bank panel has recommended allowing transactions in government bonds involving foreigners beyond usual market hours with India now part of key global bond indexes.

Such trades can be allowed to take place between 5 p.m. to 11:30 p.m. local time, a Reserve Bank of India panel recommended in a report reviewing market timings. Currently, the onshore bond market closes at 5 p.m.

The deals can be reported to the clearing house the next day before onshore markets open and settled on a T+2 basis, the report said.

“While most FPIs investing in India have an Asian office and are able to meet their requirements during the onshore trading hours, there are also US-based investors without presence in Asia who face difficulties in investing in government securities,” the panel headed by Radha Shyam Ratho wrote.

Foreign participation in India's government bond market has risen after JPMorgan Chase & Co. added the nation's debt to its emerging markets bond index. Bloomberg too is in the midst of adding the sovereign bonds to its emerging markets gauge, while another index provider FTSE Russell will include them later in the year.

Bloomberg LP is the parent company of Bloomberg Index Services Limited (BISL), which administers indexes that compete with indexes from other providers.

With rising digital payments, the report also suggests extending the timing of call money market, where banks borrow from each other, till 7 p.m. local time from 5 p.m. currently. It has also suggested extending the timing for secured funding markets like market repo till 4 p.m.

The central bank has asked for feedback on the recommendations by May 30.