RBI not in favour of offshore settlement for sovereign bonds: Report
The RBI prefers direct settlement on domestic platforms over offshore systems like Euroclear to consolidate liquidity.Summary
India's central bank, the RBI, is opting against direct settlement of government securities via offshore platforms like Euroclear. Instead, it prefers overseas investors to trade directly on the domestic NDS-OM platform. This move aims to consolidate liquidity and enhance price discovery, despite recent tax incentives designed to attract foreign capital. The RBI had previously explored allowing settlement through offshore platforms to expand the foreign investor base for local currency debt, but discussions did not take off due to capital gains and withholding taxes. Despite taxes now being scrapped, the central bank still prefers settlement via the local clearing corporation due to better price discovery and ease of buying and selling. "Let all liquidity be on NDS-OM and let foreigners participate on NDS-OM. If we allow global clearing platforms, it will fragment liquidity," one source said. Alongside MarketAxess, Bloomberg is also in the process of linking to the NDS-OM platform. Indian government bonds have been included in global bond indices such as the J.P. Morgan Emerging Market Bond Index and the Bloomberg Local Currency Emerging Market Bond Index.
(Source：The Economic Times)