At a time when global uncertainties continue to keep financial markets on edge, the Reserve Bank of India (RBI) has announced a slew of measures aimed at attracting more foreign capital into the country.
The announcements came alongside the central bank’s latest monetary policy decision, where the Monetary Policy Committee (MPC) decided to keep the repo rate unchanged at 5.25%.
The timing of these announcement is also noticeable as the country is facing with multiple challenges. For instance, rising geopolitical tension, particularly the ongoing Iran-US conflict, have pushed up crude oil prices and increased concerns around India’s import bill, foreign exchange reserves and the rupee.
Against this backdrop, the RBI has introduced a series of steps designed to strengthen capital inflows and improve the country’s external position.
Key measures announced by RBI to attracts foreign flows
Let’s take a look at the key factors to watch and what they mean for investors and the economy
#1 More access for foreign investors in government bonds
One of the biggest announcements relates to India’s government bond market.
The RBI has expanded the Fully Accessible Route (FAR), which allows foreign investors to buy certain government securities without investment restrictions. Under the latest move, all newly issued 15-year, 30-year and 40-year government bonds will now be eligible under this route.
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The central bank has also removed certain restrictions relating to short-term investments and concentration limits under the General Route.
#2 Easier investment rules for NRIs and overseas investors
The RBI has also widened investment opportunities for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).
Previously, certain investments in listed Indian equities required registration with the Securities and Exchange Board of India (SEBI). The RBI has now enhanced investment limits and extended similar benefits to all individual persons residing outside India.
#3 Support for overseas borrowings
The central bank has also announced measures aimed at helping companies raise money from overseas markets.
A concessional foreign exchange swap facility for External Commercial Borrowings (ECBs) by public sector undertakings (PSUs) has been extended until September 30, 2026.
#4 Relief for banks mobilising foreign deposits
Banks have also received support through an extension of the special facility linked to Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits.
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The RBI will continue to provide full hedging-cost support for fresh FCNR(B) deposits with maturities ranging from three to five years until September 2026.
#5 Exporters back to the normal timeline
Another important change relates to exporters.
During periods of global uncertainty, the RBI had extended the timeline for exporters to bring export earnings back into India from 9 months to 15 months.
Why is the banking regulator focusing on foreign inflows?
Foreign capital plays an important role in supporting India’s balance of payments and foreign exchange reserves.
Putting it in simple words, when overseas money flows into government bonds, equities or corporate borrowings, it helps offset pressures created by imports and global market volatility.
RBI Governor Sanjay Malhotra said the central bank would continue making policy adjustments to encourage exports and attract overseas investments whenever required.
What does this mean for India?
Taken together, these measures indicate the RBI’s attempt to strengthen external finances at a time when global risks remain elevated.
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