Explained: SRVA investment in government securities

In Business
August 14, 2025
Sandeep Deshpande
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RBI permits SRVA investment in government securities with immediate effect. Non-resident SRVA holders can now invest rupee-surpluses in G-secs/T-Bills—arriving just as the Centre runs a heavy borrowing calendar. We explain what changed, who benefits, and how AD Cat-I banks should implement the new route.

Mumbai (ABC Live): SRVA investment in government securities is now a reality. On August 12, 2025, the Reserve Bank of India allowed non-residents with Special Rupee Vostro Accounts (SRVAs) to deploy their rupee surpluses into Central Government securities, including Treasury Bills. The change is effective immediately, and it plugs a new pool of buyers into India’s sovereign bond market.

This route matters for three reasons. First, it gives exporters and importers using SRVAs a simple way to earn a sovereign return on idle rupees. Second, it supports rupee internationalisation by adding a clean, regulated channel for cross-border INR use. Third, it arrives during a heavy issuance cycle, when even modest extra demand can smooth auctions and improve liquidity.

In this explainer, we break down who can invest, how the flows work, and what AD Category-I banks must do. We also quantify potential yields, size the likely demand, and outline the immediate compliance checklist.

Key takeaways

What changed: Non-resident SRVA holders can invest rupee-surplus balances in G-secs/T-Bills under the updated framework. Moreover, the Master Direction now records the operating steps, which speeds implementation.
Why it matters today: The move lands amid a heavy GoI borrowing calendar, so additional demand can support auctions and front-end liquidity.
Scale already exists: Dozens of countries, correspondent banks, and SRVAs already operate; therefore, deployment can start quickly.
Policy arc: The step strengthens rupee internationalisation and, importantly, creates a regulated channel to hold INR assets without FPI registration.

What exactly did RBI permit?

RBI allowed persons resident outside India who maintain SRVAs for rupee trade settlement to invest their SRVA rupee surplus in Central Government securities, including Treasury Bills. RBI also folded operational instructions into the Master Direction – Non-resident Investment in Debt Instruments (2025). Consequently, the circular takes effect immediately.

Who can invest, and how do the flows work?

Eligible investors: Persons resident outside India with existing SRVAs at AD Cat-I banks.
Funding source: Use only the rupee surplus in the SRVA to buy G-secs/T-Bills; you do not need external INR sources.
Proceeds: Credit coupons, sale proceeds, and maturities back to the same SRVA, which keeps the loop clean for audit and monitoring.
No FPI licence: The route relies on SRVA status, so it runs separately from the FPI framework.

Data analysis: scale, yields, and market impact

1) A real, ready base
By early 2025, authorities cleared 123 correspondent banks across 30 countries to open 156 SRVAs with 26 Indian banks. That base already exists, so SRVA investment in government securities can scale from day one. Reuters puts SRVA balances at ~?13,455 crore (Dec 2024), which gives a concrete starting stock.

2) Yields you can act on (mid-2025 snapshot)
Indicative levels show 91D ? 5.49%, 182D ? 5.57%, 364D ? 5.59%, and 10Y ? 6.48%. Treasuries that want liquidity can lean on T-Bills; treasuries that want carry can tilt to the 10-year.

3) Earnings scenarios (annualised, simple YTM × principal)

?1,000 cr: ?55.9 cr at 364D vs ?64.8 cr at 10Y.
?5,000 cr: ?279.5 cr at 364D vs ?324.0 cr at 10Y.
?10,000 cr: ?559.0 cr at 364D vs ?648.1 cr at 10Y.
?20,000 cr: ?1,118.0 cr at 364D vs ?1,296.1 cr at 10Y.
Even modest tickets throw off meaningful income before MTM.

4) Blended portfolio with a short-tenor sleeve
Assume 30% in 364D (5.59%) and 70% in 10Y (6.48%). The blended YTM lands near 6.21%. On ?10,000 cr, that blend earns ~?621.3 cr/year (pre-MTM). Adjust the split as caps or client mandates evolve.

5) Positioning versus GoI borrowing
For H1 FY26, the Centre plans ?8.00 lakh cr via 26 weekly auctions, within ?14.82 lakh cr gross for the year.

?10,000 cr of SRVA demand covers ~0.33 weeks of H1 issuance and ~0.67% of FY26 gross.
?20,000 cr covers ~0.65 weeks and ~1.35% of FY26 gross.
You will not see a regime shift, but you should see tighter auction tails, better bid-cover, and smoother T-Bill prints in heavy weeks.

6) Risk and hedge toolkit
A +50 bps parallel shift cuts long-duration prices by ~3–3.5% (duration 6–7). Set clear duration limits, monitor VaR, and offer INR hedges to SRVA clients who chase carry at the long end.

7) What to track next
Track take-up in T-Bills, primary-auction cover, and secondary-market turnover from SRVA desks. Also watch index-inclusion milestones through October 2025, since they keep foreign attention high while this route ramps.

Why ABC Live is publishing this report — and why now

Immediate policy effect: The circular took effect on August 12, 2025; therefore, banks and clients need actionable guidance today.
Debt-market timing: The change overlaps with a dense issuance calendar; as a result, even marginal new demand can influence auction outcomes.
INR internationalisation: The route links trade settlement to a clean sovereign investment option; consequently, it expands practical INR use cases without FPI friction.

Compliance checklist for AD Cat-I banks

Map eligible clients: First, identify non-resident SRVA holders created under the July 11, 2022 mechanism.
Open custody/securities accounts: Next, set up segregated G-sec accounts; then enable NDS-OM/OTC execution and reporting.
Ring-fence flows: Thereafter, debit purchase consideration to the SRVA and credit coupons/maturities/sale proceeds back to the same SRVA.
Limit checks: Additionally, respect any sub-1-year caps and instrument eligibility until RBI/GoI notify otherwise.
Client comms & hedging: Moreover, inform clients of the route and outline INR and duration-risk hedges.
Update SOPs: Finally, align policy, KYC/AML touches, and regulatory reporting with the Master Direction – 2025 update.

FAQs

Does SRVA investment in government securities require FPI registration?
No. The SRVA route allows investment without FPI registration.

What instruments can investors buy?
Investors can buy Central Government securities, including Treasury Bills. The current circular does not include corporate debt or SDLs.

Does a short-tenor cap apply?
Yes—only up to 30% of the SRVA balance can go into sub-1-year government paper at present. Nevertheless, watch for future relaxations if RBI or GoI change the stance.

Why does this matter for markets now?
New SRVA demand lands during heavy weekly auctions and can improve coverage and pricing at the margin.