To boost the investments in the bond market, the Finance Ministry has asked the Reserve Bank of India to open a US$ 10 bn window. This window is to allow foreign individuals to invest in the corporate bonds. As per the finance ministry, this would boost the foreign investments in the bond markets as the foreign investors would be able to earn higher returns on Indian debt as compared to what they earn in US or Europe. This does come as good news for the underdeveloped bond market in the country. However, foreign investors would prefer to wait and see the tax implications of such investments. For the scheme to be successful, the foreign individual investors should be taxed at the same rate as the foreign institutional investors (FIIs). Currently the FIIs can invest up to US$ 15 bn in government securities and US$ 20 bn in corporate bonds. However, FIIs have been pulling their money out of the Indian markets since the start of the global crisis.
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