The Reserve Bank of India (RBI) and the Indian government have jointly announced a series of coordinated measures aimed at attracting foreign capital and strengthening India's external position, according to DBS Group Research [1]. The initiatives include widening the Fully Accessible Route for government securities (G-secs), liberalizing foreign portfolio investor (FPI) debt taxation, boosting non-resident equity investment, and offering concessional foreign exchange swaps and FCNR(B) incentives [1]. These steps are designed to spur dollar inflows, which could result in an increase in foreign exchange reserves and help stabilize the Indian Rupee [1].
DBS notes that the ability to attract inflows upwards of $40-50 billion would have a meaningful impact on India's external balances, with their FY27 balance of payments estimate at approximately $65 billion, assuming oil prices remain between $85-90 per barrel [1]. One of the key measures is a facility under which the RBI will provide full hedging costs until September 2026 for authorized dealers to raise fresh 3–5-year FCNR(B) deposits [1]. This scheme is reminiscent of a similar move in 2013, which attracted $26 billion in deposits and $34 billion through wider concessional swap facilities [1]. However, DBS points out that the current context of higher US interest rates means the RBI will need to offer a higher subsidy compared to 2013 [1].
Overall, the coordinated policy actions signal a strong commitment from both the RBI and the government to support the Rupee and India's external sector, with the potential for significant capital inflows if the measures are successful [1].
CONCLUSION
The RBI and Indian government's new measures are expected to attract substantial foreign capital, potentially stabilizing the Rupee and boosting reserves if inflows materialize. The success of these initiatives will depend on the scale of participation, especially given the current global interest rate environment.