South Korea's National Pension Service (NPS), the world's third-largest pension fund with more than $1.3 trillion in assets, is seeking a license to invest in Indian government securities under a compliance-light route offered by the Securities and Exchange Board of India (Sebi). According to reports from Reuters, the pension fund will be among the first to apply under the new framework, representing a significant development in India's efforts to attract foreign capital into its debt markets. Two sources with direct knowledge of the matter confirmed that South Korea's state-run pension fund is in the advanced stages of the application process, making it one of the first large global pension funds to utilize this route. The sources declined to be identified as discussions around investing are private.
The lower compliance window was specifically designed to make the investment process easier for pension and sovereign wealth funds that prefer investing in Indian government bonds. As reported by Reuters, 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. 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.
India has been actively trying to draw more foreign capital into government bonds through easier registration, lower taxes and by targeting entry into global bond indices. According to Reuters, 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 US dollar. Foreign investors have invested $14 billion in government bonds over last year and this year, while foreign holdings of government bonds are close to ₹4 trillion ($41.75 billion) according to clearing corporation data. While equities have typically dominated foreign portfolio flows in India, investors have sold nearly $45 billion in equity investments between 2025 and 2026, prompting greater focus on drawing bond investments into the market. Pension funds hold a relatively small ₹469 billion rupees in Indian debt, with much of the foreign investment in Indian sovereign debt concentrated in longer-dated benchmark government securities rather than short-term debt instruments, according to separate data from the National Securities Depository.
While South Korea's NPS currently invests in Indian securities via 33 offshore funds managed by different fund managers, much of this investment is concentrated in equities. As reported by Reuters, this would be NPS' first dedicated government-securities only investment vehicle in India, creating a separate channel for a larger allocation to sovereign bonds. One source said interest and queries are rising from this category of investors, with the source noting that South Korea's pension fund is in the advanced stages of the application process. Another source said this would be NPS' first dedicated investment vehicle in India focused only on government securities, creating a separate channel for a bigger allocation to sovereign bonds. Higher interest and queries are coming from these category of investors, with the source noting that South Korea's pension fund is in the advanced stages of the application process.
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. According to Reuters, while equities have typically dominated foreign portfolio flows in India, investors have sold nearly $45 billion in equity investments between 2025 and 2026, prompting greater focus on drawing bond investments into the market. The competitive yield environment continues to attract foreign institutional investors seeking stable returns in India's debt market. Foreign holdings of Indian government bonds are close to ₹4 trillion ($41.75 billion), according to clearing corporation data, with pension funds accounting for a relatively small portion of this total.
