Why NRIs Are Returning to Indian Debt Markets

Foreign investment in Indian corporate bonds is entering a major growth phase. In FY25 alone, foreign portfolio investment (FPI) in corporate debt rose to ₹1.21 trillion (up from ₹1.08 trillion in FY24). May 2025 delivered the strongest monthly inflow in nearly ten years, propelled by major issuances, including the Shapoorji Pallonji Group’s $3.35 billion bond that came with a striking 19.75 percent yield.

Such competitive returns combined with positive regulatory reforms and recent ratings upgrades have made the Indian debt market far more attractive than those in developed economies. 

As a result, NRIs are now returning to Indian debt markets and increasing their allocation to retail financial products. Want to understand in detail? Let’s check out the five key reasons why Indian debt markets are again a hit among the NRI fraternity. 

What Does the Latest Reserve Bank of India (RBI) Data Show?

The RBI data shows that NRIs are increasing their investments in “interest-bearing deposits”, which function like low-risk debt products. These include:

• FCNR (Foreign Currency Non-Resident Account)
• NRE (Non-Resident External Account)
• NRO (Non-Resident Ordinary)

All three deposit types give regular interest income and are widely used to preserve capital. Let’s gain more clarity and understand this trend in detail:

Category	FY24	FY25	Outstanding (Mar 2025)	Explanation
Total NRI Deposits (All Types)	₹1,26,361 crore inflows	₹1,38,911 crore inflows (up by 9.9%)	₹14,15,761 crore	Rising cash inflows are due to increasing demand for fixed-income assets with predictable returns.
FCNR (B) Deposits	₹54,155 crore inflows	₹61,032 crore inflows	₹2,81,949 crore	Works like foreign-currency bonds issued by Indian banks.  There is no forex risk, and this product offers regular interest.
NRE Deposits	₹36,103 crore inflows	₹40,401 crore inflows	₹8,65,617 crore	Higher Indian interest rates are attracting NRIs who are searching for better rupee yields.
NRO Deposits	₹36,103 crore inflows	₹37,822 crore inflows	₹2,67,336 crore	This trend suggests NRIs are keeping more rupee income within India. This shows confidence in domestic interest-bearing products.

Disclaimer: This information has been collected through secondary research, and GoldenPi is not responsible for any errors in the same.

5 Reasons NRIs are Moving Back to Indian Debt Instruments in 2025

The renewed interest of NRIs in India’s debt and bond markets in 2025 is largely due to the search for:

• Stronger yields 
• A regulatory environment that supports easier participation. 

With interest rates declining in many developed economies, India has opened up its debt market even further. Let’s understand in detail:

1. RBI Reforms That Open the Door for Easier Investment

In 2025, the RBI introduced changes that simplify how foreign investors, including NRIs, can access the debt market. Restrictions, such as short-term investment limits and concentration caps in corporate bonds, were removed. 

Let’s see how their removal made it easier for FPIs (Foreign Portfolio Investors) to invest in Indian debt products:

Regulation	What Was the Old Rule?	What Problem Did it Create?	What Does Its Removal Mean Now?
Short-Term Investment Limit	FPIs could invest only up to 30% of their total corporate debt portfolio in securities with residual maturity up to one year.	FPIs had to constantly rebalance their portfolios as bonds approached maturity.  If the short-term portion crossed 30%, they risked violating regulations.  This limited flexibility and forced unnecessary trading.	FPIs can now invest any amount in short-term corporate debt. There is no percentage cap. They can hold, buy, or sell based on market conditions.
Concentration Limits	A single FPI could invest only up to 15% of the total investment limit for long-term FPIs, and 10% for other categories.	FPIs could not take large positions in high-quality or high-yield corporate bonds, even if the issuer was strong. This restricted portfolio construction prevented investors from optimising returns.	FPIs can now take larger positions in specific corporate bonds. There is no issuer-level or category-level cap.

2. High Yields That Outpace Global Markets

Indian government and corporate bonds are offering yields far above those available in developed countries. With interest rates in the US, UK, and Europe staying low, NRIs find Indian fixed-income products more rewarding for long-term wealth creation. 

These higher yields allow investors to:

• Grow their capital faster 

and

• Protect their savings against rising living costs

The appeal increases further because many Indian bonds provide pre-determined coupon payments, which give regular income without market uncertainty.

3. Global Index Inclusion 

India’s entry into major global bond indices such as JP Morgan, Bloomberg, and FTSE Russell is a major milestone. This inclusion is expected to bring passive inflows of $35 to 45 billion over the next one to two years from index-tracking funds. 

Such large-scale participation increases liquidity across the bond market and makes it easier for investors to buy or exit positions without “price distortion”. NRIs benefit from such a highly liquid bond market as it lowers transaction risk and supports the discovery of a fair price. 

4. India’s Rating Upgrade by S&P Global

Recently, S&P Global upgraded India’s sovereign credit rating from BBB- to BBB. A sovereign rating is one of the most trusted indicators of a country’s ability to:

• Repay its debt
• Maintain financial stability
• Handle economic shocks

When this rating improves, investors immediately view the country’s bonds as safer. This sends a powerful signal to NRI investors and attracts them towards G-secs and other corporate bonds. 

5. Supporting Family Needs and Cross-Border Financial Objectives

NRIs often invest in Indian debt because the returns serve two purposes: 

• Supporting family members in India 

and

• Meeting personal financial goals abroad

Interest income from these bonds can be transferred through NRE or NRO accounts, depending on the type of income and the investor’s needs. Let’s see how:

If Funds Go into NRE Account	If Funds Go into NRO Account
The money can be fully repatriated abroad without restrictions.	The money can be used within India for expenses or investments, and part of it can also be repatriated after meeting standard documentation rules.

This dual utility encourages investors to invest in the Indian debt market and earn competitive returns, which can be used for living expenses, education, or emergency needs for the family in India.

In Summary, Rating Upgrades, Better Returns, and Positive Reforms Have Made the Indian Debt Market Attractive for NRIs

So now you know NRIs are returning to Indian debt and bond markets in 2025 due to several compelling reasons, such as:

• Attractive high yields compared to developed countries
• Regulatory reforms by the RBI that make participation easier
• India’s inclusion in major global bond indices
• Sovereign rating upgrades

Together, these factors have attracted NRIs and other foreign investors to the Indian debt market. If you are also searching for fixed-income opportunities, you may visit the GoldenPi platform. Here you can access multiple AAA and AA-rated bonds, corporate fixed deposits, and even apply to upcoming NCD IPOs.

FAQs on Why NRIs Are Returning to Indian Debt Markets

1. Why are NRIs increasing their investments in Indian debt markets?

NRIs are returning to Indian debt because yields in India are far more attractive than those in developed markets. Favourable regulatory reforms and global index inclusion further give them confidence to invest. 

2. How can NRIs invest in the Indian bond market?

NRIs can invest online through digital bond marketplaces like GoldenPi. All you must do is link your existing Demat account, complete the KYC process, explore a wide range of bonds, and make the payment. The entire journey (from verification to purchase) is 100% online, with no need for branch visits or physical paperwork.

3. Are high-yield corporate bonds in India safe for NRIs?

High-yield bonds offer better returns but come with higher risk. As an NRI, you may prefer AAA or AA-rated bonds as these issuers have high credibility and lower default risk.

4. What should NRIs check before investing in bonds or NCD IPOs?

Investors should review bond ratings, issuer credibility, and coupon payment history. This information is publicly available on reputable financial platforms and websites like CRISIL, ICRA, CARE, or Acuite Ratings.

_________________________________________________________________________________________________________________________________

Disclaimer:

This information is for general information purposes only. GoldenPi makes no guarantee on the accuracy of the data provided here; the information displayed is subject to change and is provided on an as-is basis. Nothing contained herein is intended to or shall be deemed to be investment advice, implied or otherwise. Investments in the securities market are subject to market risks. Read all the offer-related documents carefully before investing.

Bonds or non-convertible debentures (NCDs) are regulated by the Securities and Exchange Board of India and other government authorities. GoldenPi Securities Private Limited is a registered debt broker and acts as a distributor and not as a manufacturer of the product.