The RBI’s recent inclusion of state debt into the Separate Trading of Registered Interest and Principal of Securities (STRIPS) program comes with a new caveat: a 14-year residual maturity cap. Life insurers, who rely on ultra-long bonds for matching long-term liabilities, warn that this limit may severely restrict their appetite for these instruments, reducing market depth and hindering strategic financial planning.
Over half of state debt issued since April exceeds 14 years, meaning insurers like Bharti AXA Life and ICICI Prudential may be sidelined. They’ve urged the RBI to revise the cap, citing concerns about reduced duration management options and diminished liquidity in bond markets—a challenge for liability-matching strategies that underpin long-term financial products.
