In a move that will add depth to the government securities market, the Reserve Bank of India on Wednesday allowed multilateral bodies such as the International Finance Corporation and the Asian Development Bank to buy government of India dated securities. These entities have already been allowed to float rupee bonds in India.

In fact, the Asian Development Bank has already got government approval to raise up to Rs 500 crore (Rs 5 billion).

The RBI had earlier allowed foreign institutional investors and non-resident Indians to purchase government of India securities on a repatriatiable basis without any limit. However, unlike multilateral agencies, the FIIs are allowed to buy treasury bills too.

"As part of measures for further liberalisation, it has been decided that multilateral development banks like IFC, ADB, etc. which are specifically permitted by the government of India to float rupee bonds in India, may purchase government dated securities," an RBI release said.

The purchases shall be paid for either by inward remittances through normal banking channels or out of funds held in the fund account opened with the specific approval of the RBI.

In the case of sale of government dated securities by a multilateral development bank, the net maturity proceeds after payment of taxes may be either remitted abroad or credited to the fund account that has been opened with the specific approval of the RBI.