South Korea’s state-run pension fund seeks licence to invest in Indian G-Secs: Report

South Korea’s state-run National Pension Service (NPS), the world’s third-largest pension fund, is seeking a licence to invest in Indian government securities through a compliance-light route offered by the market regulator, as per a report.

The move would make NPS one of the first large global pension funds to use the Securities and Exchange Board of India’s (SEBI) lower compliance window for foreign investors investing exclusively in government bonds.

The route was introduced to simplify investments by low-risk investors such as pension and sovereign wealth funds, which tend to prefer Indian government bonds. Under the new framework, such investors need to submit documentation every 10 years, compared with every three years earlier. They are also not required to provide end-investor details, unlike investors in equities and corporate bonds.

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“Higher interest and queries are coming from these category of investors. South Korea’s pension fund is in the advanced stages, making it among the first large global pension fund to use the route,” one source said as mentioned in a report in Reuters.

The NPS, which has more than $1.3 trillion in assets, already invests in Indian securities through 33 offshore funds managed by different fund managers, although much of its exposure is in equities. The proposed investment would be its first dedicated government-securities-only vehicle in India, creating a separate channel for a larger allocation to sovereign bonds, the second source said.

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India has been seeking to increase foreign participation in its government bond market through easier registration, lower taxes and efforts to gain inclusion in global bond indices. The push is aimed at diversifying funding sources and attracting more stable capital inflows, with the rupee trading near historic lows against the US dollar.

Foreign investors have invested $14 billion in Indian government bonds over the last year and this year. Their holdings are close to ₹4 lakh crore ($41.75 billion), according to clearing corporation data.

India’s 10-year sovereign bond yield is around 7%, while shorter-dated Treasury bills yield about 5.30%-6%.