Indian Economic Updates : Higher Foreign Inflows into G-Secs May Reduce SLR

S&P Global suggests that India's inclusion in global bond indices will boost foreign inflows into government bonds, potentially reducing banks' role in financing government debt over time. This could lead to a reduction in the statutory liquidity ratio (SLR), currently set at 18% of banks' net demand and time liabilities. With JP Morgan adding Indian government bonds to its Emerging Markets Bond Index by June 2024, foreign investment is expected to rise by $20-$25 billion. Increased foreign participation in India's debt market will reduce reliance on domestic funding, though it may bring volatility. Domestic banks' holdings of central government bonds have already grown 14% between March 2023 and 2024.

#spglobalsolution #rbi #investment