New Delhi – Reserve Bank of India (RBI) Governor Sanjay Malhotra today announced a series of policy adjustments designed to significantly enhance India's appeal for foreign investment. The move comes as the nation grapples with substantial capital outflows, particularly from its equity markets.
Addressing Capital Outflows
During the 2026-27 fiscal year, India experienced net Foreign Portfolio Investor (FPI) outflows totaling US$13.7 billion, largely concentrated in the equity sector. Governor Malhotra emphasized the need to reverse this trend and strengthen the country's balance of payments through proactive measures.
Key Measures Introduced by the RBI
Expanding the Fully Accessible Route (FAR)
- The central bank has broadened the definition of "specified securities" under the Fully Accessible Route (FAR). This now includes all new issuances of 15-year, 30-year, and 40-year government securities, making a wider range of long-term debt instruments available to foreign investors.
- Additionally, the RBI has removed several restrictions for FPI investments under the general route, including limits on short-term investment, concentration, and individual securities. These changes, coupled with prior government tax benefits, are expected to draw increased foreign capital into government borrowing.
Boosting NRI and OCI Equity Investments
- Investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments traded on stock exchanges have been increased. Crucially, these higher limits no longer require registration with the Securities and Exchange Board of India (SEBI).
- This enhanced facility has also been extended to all individual Persons Resident Outside India (PROIs), bringing them on par with NRIs and OCIs. This liberalization aims to facilitate more dynamic mobilization of foreign portfolio capital from the diaspora and other individual overseas investors.
Introducing Concessional Foreign Exchange Swap Facilities
- To encourage external commercial borrowings (ECBs) by public sector undertakings (PSUs), the RBI has introduced a concessional foreign exchange swap facility. This facility will be available until September 30, 2026.
- A similar hedging cost coverage facility will also be available to authorized dealer (AD) banks until September 30, 2026. This is intended to incentivize these banks to raise fresh three-to-five-year Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, further bolstering foreign currency reserves.
Governor Malhotra also noted that India's foreign exchange reserves stood robustly at $682.3 billion as of May 29. He highlighted that these new policy initiatives, alongside existing efforts like agreements with major trading partners, 100% FDI in the insurance sector, and the liberalization of the ECB framework, are set to significantly strengthen the nation's balance of payments position.