Fully Accessible Route (FAR) Bonds

• 04 Dec 2025

Source: ET

Why in News? 

Foreign portfolio investment (FPI) through Fully Accessible Route (FAR) eligible bonds stood at Rs 5,760 crore in November, drawing attention to India’s debt market and the factors influencing FPI participation.

What is a Fully Accessible Route (FAR)?

• About: The FAR is an Reserve Bank of India (RBI) framework introduced in 2020 that allows unrestricted foreign investment in select Government of India securities known as FAR Bonds. 
• Key Features:
  • No Investment Limits: Under FAR, Foreign Portfolio Investors (FPIs), Non-Resident Indians, Overseas Citizens of India and other eligible entities can invest in these government securities without quantitative caps.
  • Open Access: These bonds offer free buy–sell access, making them more attractive for global investors.
• Significance: FAR bonds are crucial for making India’s debt market more competitive and internationally visible.
  • In 2024, JP Morgan added 29 Indian FAR-designated G-secs to its Emerging Market Bond Index (EMBI), marking India’s first entry into a major global bond benchmark.
  • This inclusion is expected to attract significant foreign inflows into Indian government bonds.

Other Routes for Foreign Investment in Indian Debt

• General Route (GR): The standard route FPIs use to invest in corporate bonds. It is subject to quantitative limits, unlike FAR.
• Voluntary Retention Route (VRR): It is a special RBI framework that allows FPIs to invest in Indian debt with fewer regulatory restrictions, provided they voluntarily commit to retain a minimum share of their investments in India for a fixed period.

Foreign Portfolio Investment (FPI)

• Foreign Portfolio Investment (FPI):  It refers to foreign investment in a country’s financial assets such as stocks and bonds, without taking control of a business. 
  • It is passive, short-term in nature, and aimed at capital gains and diversification. 
  • FPIs improve market liquidity and reflect investor confidence. 
  • In India, an FPI can hold up to 10% of a company’s shares without being treated as Foreign Direct Investment (FDI).
• Factors Influencing FPI Participation in India:
  • Interest Rate Differential: Higher Indian bond yields compared to other emerging markets make Indian assets more attractive.
  • Exchange Rate Stability: A stable or appreciating rupee supports FPI inflows, while sharp depreciation triggers outflows.
  • Monetary Policy Expectations: Anticipation of RBI rate cuts, Open Market Operations (OMOs), or liquidity support shapes investor sentiment.
  • Sovereign Ratings & Index Inclusion: India’s potential inclusion in major global bond indices (like Bloomberg Global Aggregate Index) encourages early, front-loaded inflows.
  • Regulatory Environment: Liberal policies such as the FAR improve ease of investment and repatriation.

Frequently Asked Questions (FAQs)

1. What are FAR Bonds?
FAR Bonds are Government of India securities designated under the Fully Accessible Route (FAR) (RBI, 2020) that permit unrestricted foreign investment with no quantitative caps, improving market access and repatriation ease.

2. How do FAR bonds affect FPI inflows?
FAR makes Indian G-secs more attractive to global investors and index funds, raising inflows and bond-market liquidity.

3. What is the Voluntary Retention Route (VRR)?
VRR is an RBI scheme that invites FPIs to commit to retaining a stipulated share of investment for a fixed period (encouraging long-term flows) in exchange for relaxed regulatory norms

Summary

• The Fully Accessible Route (FAR), introduced by the RBI in 2020, allows unrestricted foreign investment in select Government of India securities.
• FAR bonds have boosted India’s global debt visibility, with JP Morgan including 29 FAR-designated G-secs in its Emerging Market Bond Index in 2024.
• FPIs are influenced by factors like interest rate differentials, rupee stability, monetary policy expectations, and global index inclusion.
• FAR, along with routes like GR and VRR, is helping attract stronger foreign participation and deepen India’s debt market.

UPSC Civil Services Examination, Previous Year Questions (PYQ)

Prelims

Q. Which one of the following groups of items is included in India’s foreign-exchange reserves? (2013)

(a) Foreign-currency assets, Special Drawing Rights (SDRs) and loans from foreign countries

(b) Foreign-currency assets, gold holdings of the RBI and SDRs

(c) Foreign-currency assets, loans from the World Bank and SDRs

(d) Foreign-currency assets, gold holdings of the RBI and loans from the World Bank.

Ans: (b)

Q. With reference to Foreign Direct Investment in India, which one of the following is considered its major characteristic? (2020)

(a) It is the investment through capital instruments essentially in a listed company.

(b) It is a largely non-debt creating capital flow.

(c) It is an investment which involves debt-servicing.

(d) It is the investment made by foreign institutional investors in the Government securities.

Ans: (b)