Korea’s National Pension Service, which has more than $1.3 trillion in assets, will be one of the first to apply under the Securities and Exchange Board of India (SEBI) lower compliance window for foreigner investors investing only in government bonds, the sources said.
MUMBAI: South Korea’s state-run pension fund, the world’s third-largest, is seeking a licence to invest in Indian government securities under a compliance-light route offered by the market regulator, two sources with direct knowledge of the matter said.
India has been trying to draw more foreign capital into government bonds through easier registration, lower taxes and by targeting entry into global bond indices.
The drive to deepen foreign participation in India’s debt market is part of efforts to diversify funding sources and attract more stable capital inflows, with the rupee trading near historic lows against the U.S. dollar.
While equities have typically dominated foreign portfolio flows in India, investors have sold nearly $45 billion in equity investments between 2025 and 2026 so far, prompting greater focus on drawing bond investments.
Foreign investors have invested $14 billion in government bonds over last year and this year.
India’s benchmark 10-year sovereign bond yields are about 7%, while shorter-dated Treasury bills yield roughly 5.30%-6%, levels that compare favourably with many developed-market government securities.
Korea’s National Pension Service, which has more than $1.3 trillion in assets, will be one of the first to apply under the Securities and Exchange Board of India (SEBI) lower compliance window for foreigner investors investing only in government bonds, the sources said.
The sources declined to be identified as discussions around investing are private.
Email queries sent to South Korea’s pension fund and SEBI were not answered.
The lower compliance window was opened to make the investment process easier for pension and sovereign wealth funds, which tend to prefer investing in Indian government bonds, the first of the two sources said.
“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,” the source added.
Under the new route, low risk investors such as sovereign wealth funds and pension funds need to submit documentation only every 10 years compared to the earlier requirement of three years. These funds do not have to furnish their end-investor details as required for equity and corporate bond investors.
Unlike several major markets where overseas investors can access government bonds with limited upfront registration requirements, India requires investors to obtain registration and submit documentation establishing their identity and eligibility.
While South Korea’s National Pension Service (NPS) invests in Indian securities via 33 offshore funds managed by different fund managers, much of this is in equities.
This would be NPS’ first dedicated government-securities only investment vehicle in India, creating a separate channel for a larger allocation to sovereign bonds, the second source said.
Foreign holdings of government bonds are close to 4 trillion rupees ($41.75 billion), according to clearing corporation data.
Pension funds hold a relatively small Rs 469 billion in Indian debt, separate data from the National Securities Depository shows. Much of the foreign investment in Indian sovereign debt is concentrated in longer-dated benchmark government securities, rather than short-term debt instruments.
Reuters