South Korea's National Pension Service, the world's third-largest pension fund, is reportedly seeking authorization to invest in Indian government bonds through a channel offered by India's market regulator that comes with relatively relaxed compliance requirements, according to sources familiar with the matter.

India has been working to attract greater foreign investment into its government bonds through measures such as simplifying registration procedures, lowering taxes, and pursuing inclusion in global bond indices. With the rupee hovering near record lows against the U.S. dollar, the country is focused on expanding foreign participation in its bond market, aiming to diversify funding sources and draw in more stable capital inflows.

Although foreign portfolio investment in India has historically been dominated by equities, investors have offloaded nearly $45 billion in stocks cumulatively during the 2025-2026 period, heightening the emphasis on attracting bond investment. Over the past year and so far this year, foreign investors have poured $14 billion into Indian government bonds. India's benchmark 10-year sovereign bond yields approximately 7%, while short-term treasury bills offer yields between 5.30% and 6%; these return levels are relatively attractive compared with government debt in many developed markets.

According to the sources, the National Pension Service, which manages assets exceeding $1.3 trillion, is poised to be among the first institutions to file applications under the "relaxed compliance pathway" established by the Securities and Exchange Board of India (SEBI) for foreign investors focused exclusively on government bonds. One of the sources indicated that this relaxed compliance channel was created to streamline the investment process for pension funds and sovereign wealth funds, as such investors typically favor Indian government debt.

"These investors have shown heightened interest and have been making frequent inquiries. The National Pension Service's preparations are in the advanced stages, and it is set to become one of the first major global pension funds to adopt this new channel," the source added. Under this new framework, low-risk investors such as sovereign wealth funds and pension funds are only required to submit documentation once every ten years, compared with the previous requirement of every three years. Additionally, these funds are exempt from providing detailed information on their ultimate beneficiaries, a requirement that applies to investors in equities and corporate bonds.

Unlike major markets that permit overseas investors to access government bonds with minimal upfront registration requirements, India mandates that investors complete registration and submit documents verifying their identity and investment eligibility. While the National Pension Service currently participates in Indian securities markets through 33 offshore funds managed by various fund managers, its exposure has been concentrated primarily in equities. According to another source, this will mark the National Pension Service's first investment vehicle in India dedicated exclusively to government securities, establishing a separate channel to expand its allocation to sovereign debt.