HSBC Purchases at Least $3B of Indian Government Bonds Since July 2026

HSBC Holdings has quietly emerged as one of the largest foreign buyers of Indian sovereign debt, purchasing at least $3B of Indian government bonds since July 2026. The buying has been financed through a tailored deposit channel aimed at overseas Indians, effectively recycling diaspora dollars back into domestic government debt. The strategy is landing as foreign demand for Indian bonds accelerates sharply. Foreign investors have put $7.7B into Indian debt year-to-date through mid-July 2026, already above the $6.6B recorded in all of 2025. HSBC's at-least-$3B haul represents a sizeable share of that inflow. Indian 10-year government securities have been yielding about 6.8% to 7%, offering a roughly 34% premium versus developed-market peers. The tax backdrop has also improved: India eliminated withholding tax and capital gains tax on government bonds for foreign investors, effective April 1, 2026. The change reduces tax drag, bringing gross and net yields closer and strengthening the risk-return appeal for large institutions. A key funding source has been foreign-currency non-resident deposits (FCNR), dollar-denominated accounts held by members of the Indian diaspora. Some institutions have offered as much as 19x leverage on FCNR dollar deposits via branches in GIFT City, Gujarat's international financial services hub. In practice, overseas Indians place dollars into FCNR accounts, banks deploy that dollar funding into higher-yielding Indian government bonds, and the spread between funding costs and bond yields drives profits while NRI depositors receive competitive rates. The setup has helped spur a broader NRI deposit-raising push among Indian lenders. For India's bond market, the scale of foreign buying is notable. Foreign purchases totaled roughly $3.04B in July 2026 alone, indicating HSBC was not the only heavyweight in the market. The leveraged FCNR strategy also warrants scrutiny. A 19x leverage ratio can magnify losses if market conditions shift. The trade tends to hold up while Indian bond yields remain stable and the rupee avoids sharp depreciation against the dollar.