RBI measures to attract $75bn bond inflows in 2026

What RBI announced on June 5

The Reserve Bank of India (RBI) on June 5 announced a package of bond-market and foreign exchange measures aimed at drawing more dollars into India and easing foreign currency liquidity strains. The central bank kept the repo rate unchanged at 5.25%, while rolling out a mix of structural and temporary steps focused on the capital account and market access. The package spans sovereign bond market access, non-resident investment rules, foreign exchange swap facilities, and support for banks raising foreign currency deposits. The RBI also moved to restore export-related timelines to improve the flow of foreign exchange from trade. The stated objective is to attract foreign capital, deepen domestic markets, and improve foreign exchange liquidity. Market participants have described the approach as calibrated, with multiple smaller moves instead of one large rate adjustment.

Repo rate unchanged, focus shifts to capital account tools

By keeping the policy rate unchanged at 5.25%, the RBI signaled that interest rates remain primarily focused on inflation control. At the same time, the package underlines a parallel effort to support the rupee and external balances through measures that can improve foreign exchange availability. Governor Sanjay Malhotra said the central bank had decided to introduce temporary and structural measures to improve foreign exchange availability and make Indian debt markets more accessible to overseas investors. The separation of goals is important in the RBI’s messaging: monetary policy is meant to anchor inflation, while balance-of-payments support is pursued through market access and liquidity initiatives. Analysts cited in the coverage said this mix is intended to reduce pressure on currency management while keeping domestic monetary conditions aligned with inflation objectives.

FAR expansion widens access to long-tenor G-Secs

A central plank of the package is the expansion of the Fully Accessible Route (FAR) for foreign investors in Indian government bonds. The RBI said all new issuances of 15-year, 30-year and 40-year government securities will now be included under FAR. This is designed to widen the pool of securities available to foreign investors without investment caps under the FAR framework. The measures are expected to provide support to the long end of the government bond yield curve and improve investor sentiment. The changes also align with the stated aim of deepening domestic markets by improving participation in longer-tenor sovereign debt.

Investment limits removed across other G-Secs and FPI rules eased

Beyond FAR, the RBI announced that investment limits on other government securities will be removed, further opening the sovereign bond market to foreign capital. The text also notes that limits relating to short-term investment, concentration, and individual securities for foreign portfolio investment under the General Route were removed. Together, these steps broaden foreign portfolio investors’ operating room across government securities. The combined changes target frictions that can restrict portfolio construction, especially for larger foreign investors who must manage concentration and security-wise limits.

NRI and OCI investment access expanded

The RBI also expanded investment opportunities for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). The central bank said investment limits for NRIs and OCIs will be increased and the facility will now be extended to all individual persons residing outside India. While the coverage does not quantify the revised limits, the direction is clear: larger non-resident participation is being encouraged. This step complements the broader bond-market access measures and adds another potential channel for stable foreign capital.

FX swap windows, PSU ECB incentives, and FCNR(B) deposit support

On the foreign exchange side, the RBI announced a concessional foreign exchange swap facility that will remain available until September 30, 2026. The measures also include incentives for external commercial borrowings (ECBs), particularly by public sector undertakings (PSUs). The policy details described a concessional forex swap till Sep’26 to incentivize ECBs by PSUs.

Another key measure is a special facility for banks, under which banks can raise three-to-five-year FCNR(B) deposits. The text also states that hedging costs will be provided till Sep’26 to AD banks for raising fresh 3-5-year FCNR deposits, implying support linked to the full hedging cost. These measures are aimed at improving foreign currency liquidity and reducing the cost and complexity of mobilising foreign currency resources through the banking system.

Export proceeds timeline restored to nine months

The RBI proposed restoring the time period for realisation of export proceeds to nine months. The move is meant to improve the flow of foreign exchange from trade, supporting overall foreign exchange liquidity. By adjusting export-related timelines, the RBI is using operational rules around trade receipts as an additional lever alongside market-access and swap facilities.

Government tax changes on G-Secs add momentum

The coverage also notes steps announced by the Centre to pull foreign capital into India. It states that the long-term capital gain tax (12.5 percent) and withholding tax (20 percent) on government securities (G-Secs) have been abolished. The article frames this as a strengthening of the RBI’s initiatives by removing tax friction on foreign investments in government securities. While the tax change is not described as an RBI action, it is presented as part of the broader policy push to attract foreign capital into Indian debt.

Key measures at a glance

Market impact: what the package is designed to change

The package is aimed at increasing dollar inflows and easing foreign currency liquidity strains, while also improving domestic liquidity conditions through channels linked to foreign capital and bank funding. By widening FAR and removing multiple investment limits, the RBI is targeting higher participation in sovereign bonds, including longer tenors that influence the “long end” of the yield curve. Separate reporting in the provided text says these steps could revive sentiment in the bond market and potentially attract inflows of around $15 billion.

On liquidity management, the broader context includes earlier RBI actions using variable rate repo (VRR), FX swaps, and open market operations (OMOs). One report said that on January 24, 2026, the RBI detailed a plan to inject over $13 billion (approximately ₹2,00,000 crore) via a ₹25,000 crore VRR auction, a $10 billion USD/INR buy/sell swap with a 3-year tenor, and ₹1,00,000 crore of government bond purchases. Another report described RBI’s plan to buy ₹2,00,000 crore of government bonds in four tranches and conduct a $10 billion swap, highlighting how FX intervention and liquidity operations can be paired.

Why the calibrated approach matters

The policy package has been widely viewed, as described in the text, as a proactive step to attract foreign capital, strengthen external balances, and reinforce confidence in India’s financial markets. It also illustrates a sequencing choice: rather than relying on a single large rate move, the RBI used multiple market-structure and liquidity measures. The combination of FAR expansion, removal of FPI limits, FX swap windows, and bank deposit support is designed to address both accessibility (who can invest and how much) and plumbing (how dollars and hedges are sourced).

The measures also reflect a broader attempt to reduce costs associated with foreign currency funding and hedging, particularly through the FCNR(B) support and swap facilities. Alongside this, the export realisation timeline change is a trade-related lever to improve FX inflows from existing activity rather than only depending on portfolio flows.

Conclusion

The RBI’s June 5 package keeps the repo rate at 5.25% but targets foreign inflows through wider access to government bonds, eased non-resident investment rules, FX swap facilities, and support for banks raising foreign currency deposits. It also restores the export proceeds realisation period to nine months to improve FX flows from trade. With the Centre also removing specified taxes on foreign investments in G-Secs, the combined steps are positioned to improve bond-market sentiment and foreign exchange liquidity. Several facilities have defined timelines, including measures running until Sep 30, 2026 and Sep’26, which will keep attention on RBI’s follow-through and operational details as these windows are used.