Fully Accessible Route

Indian Economy glossary

Also called: FAR · Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT

Meaning

The Fully Accessible Route (FAR) is a channel that RBI opened on 30 March 2020. Through it, non-residents can invest in specified government securities (G-secs) with no investment limit [1].

It matters because only FAR bonds can be included in global bond indices. FAR is the route through which large foreign index money now comes into India's government debt market.

Explanation

How FAR works

  • G-sec (government security) means a debt paper the government sells to borrow money. The buyer lends money to the government and gets interest in return.
  • Non-resident means an investor who lives or is based outside India. Most of them are FPIs (foreign portfolio investors). An FPI buys bonds or shares without taking control of a company.
  • RBI chooses the bonds and publishes the list of FAR-eligible securities [1].
  • Only the bonds on this list count as "specified G-secs".

  • Other bonds stay under the older, capped route.

  • In the specified bonds, foreign holding has no ceiling [1].

  • Foreign investors can buy as much of these bonds as they like.

  • RBI does not have to stop them when a limit is reached.

  • Any FPI investment already held in those specified bonds was moved under FAR [1].

FAR compared with the older, limit-based route

  • Medium-term framework (MTF) = the older system. Under it, total FPI holding in government debt is capped.
  • FPIs may hold at most 6% of outstanding central G-secs [1].

  • FPIs may hold at most 2% of outstanding SDLs (State Development Loans, the bonds sold by state governments) [1].

  • FAR removes the cap, but only for the specified bonds.

  • General route: a limit applies to the whole category, so foreign buying stops at 6% or 2%.

  • FAR: no limit, but it covers only the bonds RBI has listed.

  • Illustration with the note's figures:

  • Under the general route, if foreign investors already hold 6% of outstanding central G-secs, they cannot buy more through that route.
  • A bond on the FAR list has no such limit. Foreign investors can keep buying it.

Why FAR led to global index inclusion

  • Global bond index = a list of bonds that international funds use as a benchmark, for example JP Morgan GBI-EM.
  • Passive funds (index funds that copy an index automatically) must buy the bonds in an index, in line with each bond's weight.
  • Index providers include a country only if foreigners can buy and sell its bonds freely.
  • Capped bonds do not meet this test, because a fund could be blocked from buying.

  • FAR bonds meet it, because they have no limit.

  • The chain: FAR (2020) → bonds with no limit → India eligible for indices → passive funds must buy FAR bonds → more foreign demand for G-secs.

  • What raises or lowers FAR inflows:
  • Up: index weight rising, India's yields looking attractive, a stable rupee.
  • Down: index weight cut, rising global risk, fear of rupee depreciation.

In India

  • Institution: RBI runs FAR. It announced the route by circular on 30 March 2020 and publishes the list of eligible bonds [1]. RBI also manages the Centre's debt by statute, under the RBI Act 1934.
  • Legal setting: G-secs are issued, transferred and held under the Government Securities Act 2006. FAR is a way of accessing these securities, set by an RBI circular. It is not a separate law.
  • Index inclusion (open only to FAR bonds):
  • JP Morgan GBI-EM: from 28 June 2024. The weight was raised in steps to 10% by March 2025.
  • Bloomberg EM Local Currency index: from January 2025.

  • FTSE EMGBI: from 2025 (verify current).

  • Latest figure: FPIs held about 3.3% of outstanding G-secs (May 2026), mostly through FAR (verify current).

  • Wider change: FAR, like RBI Retail Direct (November 2021), widens the set of buyers of G-secs. With more buyers, the government depends less on banks that are forced to buy.

Don't confuse with

  • General FPI route (medium-term framework): this route has limits, 6% of central G-secs and 2% of SDLs [1]. FAR has no limit, but it covers only the specified G-secs RBI has listed [1].
  • Global bond index inclusion: this is a decision by a private index provider such as JP Morgan. FAR is RBI's rule that made Indian bonds eligible for inclusion. FAR came first (2020) and inclusion followed (2024).
  • RBI Retail Direct: this is for resident individuals. They open a Retail Direct Gilt (RDG) account with RBI and trade on NDS-OM [2]. FAR is for non-residents.
  • FDI (foreign direct investment): FDI means buying a stake in a company, often with control, for the long term. FAR investment is portfolio debt investment. It is lending to the government through tradable bonds, and it can leave quickly.

Prelims Hooks

  • FAR was introduced by RBI circular on 30 March 2020. It allows non-residents to invest in specified G-secs with no investment limit [1].
  • RBI, not SEBI or the Finance Ministry, publishes the list of FAR-eligible securities [1].
  • Trap: FAR does not remove limits on all government debt. The general FPI limits are still 6% of central G-secs and 2% of SDLs [1].
  • FPI investment that already existed in the specified securities was counted under FAR when the route began [1].
  • Only FAR bonds are eligible for global indices. JP Morgan GBI-EM inclusion began on 28 June 2024, with weight reaching 10% by March 2025.
  • FPIs held about 3.3% of outstanding G-secs (May 2026), mostly through FAR.

Mains Points

  • FAR and index inclusion as a double-edged sword:
  • Gains: more buyers → lower yields, so government borrowing is cheaper; a deeper market with better price discovery; foreign money helps finance the current account deficit (CAD) (the gap by which a country's payments abroad exceed its earnings from abroad).
  • Risks: passive "hot money" leaves automatically when index weights change or global risk rises → foreigners sell bonds and take dollars out → the rupee weakens.

  • Safeguards: a credible fiscal path and adequate forex reserves.

  • FAR and the impossible trinity:

  • A country cannot have free capital flows, a fixed exchange rate and independent monetary policy all at the same time.

  • By opening G-secs without limits, India moves towards freer capital flows. So RBI has less freedom in setting interest rates and managing the rupee.

  • From captive demand to market discipline:

  • Banks buy G-secs partly because the SLR (the share of deposits banks must keep in liquid assets, mostly G-secs) requires it. Critics call this financial repression.
  • FAR, together with Retail Direct, brings in new buyers who invest by choice. This reduces dependence on forced bank buying.
  • Foreign investors also react quickly to bad fiscal news, which puts pressure on the government to borrow prudently.

Related concepts

Read more

Sources

  1. 1RBI — 'Fully Accessible Route' for Investment by Non-residents in Government Securities (Circular, 30 March 2020)rbi.org.in · tier 1
  2. 2RBI Press Release — RBI Retail Direct Scheme (12 November 2021)rbi.org.in · tier 1