India in talks to bond with Euroclear to attract funds

NEW DELHI: India has initiated talks to join Euroclear, the world's largest securities settlement system, as it seeks to attract the much-needed foreign capital into the country. "We are in talks with them to join...We are looking at changes that will be required in our norms," a senior finance ministry official told ET on condition of anonymity.

Senior officials from the finance ministry, the Reserve Bank of India ( RBI) and the Securities & Exchange Board of India ( Sebi) are expected to meet soon to discuss the issue, the official added.

The discussions are part of India's plans to create international presence for its debt issuances and draw new class of investors into the country, which have hitherto remained away from the country's capital markets.

Euroclear, a global settlement platform, holds assets valued at 23 trillion and settles securities transactions worth over 540 trillion per annum.

Successful rupee-denominated and Eurocleared bond issuance by the International Finance Corporation has bolstered the government's plan to internationalise the rupee and deepen its capital markets to attract foreign capital needed to fund India's large current account deficit. The rupee suffered a sharp depreciation vis-a-vis the dollar recently on apprehensions that the US Federal Reserve was planning to withdraw its fiscal stimulus programme.

India is already discussing inclusion of government debt in global indices, and joining Euroclear could take it a step closer. Market experts say joining Euroclear could help the country attract a new set of investors. "The quasi issuances or sovereign issuances from India would receive favourable response and access to an altogether different set of investors sitting on the largest liquidity if such issuances are Euroclearable," said Vasudha Sundararaman, managing director and chief executive at SBISG Global Securities Services. "Euroclear has widespread reach and robust infrastructure today, and there is a large chunk of investors who would only invest if the product is Euroclearable."

India will be able to reach the largest pool of liquidity, which our markets never had access to hitherto only if it tied up this end, she added.

However, India will be required to make changes in regulations under the Foreign Exchange Management Act to join the settlement system. Indian regulators have been in touch with Euroclear, and based on the feedback received on the eligibility, the finance ministry will be involved in the next round of talks, the official quoted earlier said. A decision on the timing to join the system would be taken after considering all factors, including the market conditions.

The country has already taken several steps to deepen its debt market and to attract foreign investment. It earlier removed sub-caps on foreign investment in government debt and discontinued the auction of available limits.