Six Measures By RBI To Open More Doors For Foreign Capital Amid CAD Pressure

The Reserve Bank of India (RBI) left the repo rate unchanged at 5.25% and retained its neutral policy stance on Friday. However, alongside the policy decision, the central bank announced a six-point package aimed at increasing foreign capital inflows into the country.

The measures cover government securities, foreign portfolio investments, overseas Indian equity investments, external commercial borrowings, FCNR(B) deposits and export earnings.

The announcement came as the RBI lowered its FY27 GDP growth forecast to 6.6% from 6.9% and raised its inflation projection to 5.1% from 4.6%.

One of the key measures was the expansion of the Fully Accessible Route (FAR) to include all new 15-year, 30-year and 40-year government securities.

The move allows foreign investors broader access to long-term sovereign bonds and is expected to deepen participation in India's debt market.

The RBI also removed concentration limits for foreign portfolio investors under the general route.

The change gives FPIs greater flexibility in allocating investments across Indian debt securities and simplifies market access.

In another significant step, the central bank increased investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in listed Indian equities without requiring SEBI registration.

The facility has also been extended to resident individuals living abroad, broadening the pool of potential overseas investors.

To support overseas borrowing by public sector companies, the RBI extended the concessional forex swap window for external commercial borrowings (ECBs) until September 30, 2026.

The move is expected to help PSUs manage foreign currency borrowing costs amid global market volatility.

The central bank also extended full hedging-cost support for banks raising Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities of three to five years until September 30, 2026.

This could encourage banks to attract more foreign currency deposits from overseas Indians.

Additionally, the RBI restored the export proceeds realisation period to nine months from the earlier 15 months.

Exporters will now have to bring back overseas earnings within a shorter timeframe, potentially improving the flow of foreign exchange into the economy.

Why These Measures Are Important

While the RBI refrained from changing interest rates, the six measures indicate a broader effort to strengthen foreign exchange inflows and improve liquidity in the financial system.

By making government bonds more accessible, easing investment rules, supporting foreign currency deposits and overseas borrowings, and accelerating the repatriation of export earnings, the central bank aims to make Indian financial assets more attractive to global investors without altering monetary policy.