RBI dollar inflow steps 2026: FAR bonds, swaps, FCNR

Why the RBI moved beyond interest rates

The Reserve Bank of India (RBI) on Friday announced a set of measures aimed at pulling more US dollars into India and easing foreign currency liquidity pressures as the rupee remains under strain. The central bank kept the repo rate unchanged at 5.25%, signalling that the immediate response would rely more on market access and liquidity tools than a rate move. The backdrop includes higher crude oil prices following the conflict in West Asia and heavy foreign investor outflows from Indian equities this year. Together, these factors have increased demand for dollars and weighed on the exchange rate.

Governor Sanjay Malhotra said the RBI would use a mix of temporary and structural steps to improve the availability of foreign exchange and to make Indian debt markets more accessible to overseas investors. The package spans government bond market access, investment limits for non-residents, forex swap support, external borrowing facilitation, and special treatment for FCNR(B) deposits. The RBI also relaxed an operational rule for exporters by restoring the export proceeds realisation period to nine months.

Repo rate held at 5.25% as liquidity tools take priority

Keeping the policy rate unchanged at 5.25% places the focus on tools that directly influence dollar supply in the onshore market. The RBI’s measures are designed to either increase the attractiveness of rupee assets to foreign investors or reduce the friction and cost for banks and firms to bring in foreign currency. This approach mirrors how central banks often respond during external shocks when exchange rate pressures rise but policy rates are held steady.

The RBI’s messaging also implicitly recognises that the rupee’s weakness is being driven by external conditions such as energy prices and risk-off flows. The central bank did not position the steps as a quick fix for the exchange rate. Instead, the emphasis was on improving dollar liquidity and keeping financial conditions from tightening sharply because of currency defence actions.

More government bonds opened under the Fully Accessible Route

A central element of the announcement is the expansion of the Fully Accessible Route (FAR) for government securities. The RBI said all new issuances of 15-year, 30-year and 40-year government securities will now be included under FAR. Under FAR, foreign investors can invest in eligible government bonds without being subject to investment limits.

The RBI also said investment limits on other government securities will be removed, further opening the sovereign bond market to foreign capital. The move is aimed at making Indian government bonds more investable for global investors, particularly because FAR securities are already included in three major global bond indices. By widening the pool of eligible bonds, the RBI is seeking to make India’s debt market a more consistent destination for long-term overseas funds.

Higher NRI and OCI investment limits broaden the investor base

To tap diaspora and overseas individual interest, the RBI 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 be extended to all individual persons residing outside India.

This change is aimed at widening participation beyond a narrow set of eligible categories and potentially improving the stability of inflows, given that diaspora-linked flows can sometimes be less sensitive to short-term risk sentiment than foreign portfolio flows. The RBI’s framing suggests it wants multiple channels of dollar inflows rather than dependence on a single source.

Concessional forex swap window until September 30

The RBI announced a concessional foreign exchange swap facility that will be available until September 30. Such swap windows are meant to reduce the cost for banks and market participants to convert dollars into rupees, encouraging them to bring foreign currency onshore.

The RBI has used swap arrangements in earlier episodes of forex stress to boost dollar liquidity. In the current context, the swap window is positioned as a practical tool to smooth liquidity strains without changing policy rates. The deadline-based structure also indicates the RBI is treating the measure as a targeted response to near-term stress conditions.

Support for external commercial borrowings, including PSUs

Another channel highlighted by the RBI is external commercial borrowings (ECBs), particularly by public sector undertakings (PSUs). ECBs allow Indian companies to raise funds from overseas markets, creating a direct pathway for foreign currency inflows.

The central bank’s intent is to make such borrowings more attractive at a time when external financing conditions have become more challenging. While the RBI did not quantify expected inflows, the inclusion of ECB support in the package underlines that the policy goal is to diversify sources of dollars into the system.

Special push for FCNR(B) deposits with hedging support

The RBI also announced a special facility for banks to raise three-to-five-year Foreign Currency Non-Resident Bank (FCNR(B)) deposits until September 30, with support related to the full hedging cost. FCNR(B) deposits are a key source of foreign currency because they let Indians living abroad hold fixed deposits in foreign currencies.

Historically, special FCNR schemes have been used during periods of currency volatility to attract dollars into the banking system. The article also notes the precedent from 2013, when similar measures attracted $16 billion of inflows after the RBI offered a concessional swap window to attract FX deposits from overseas Indians. That episode helped reverse the rupee’s depreciation trajectory, while also carrying a cost because the RBI offered subsidised FX hedges to banks.

Export proceeds realisation period restored to nine months

The RBI said it will restore the time period for realisation of export proceeds to nine months. The measure gives exporters more time to bring earnings back into India.

While this is not a direct inflow incentive like FAR or FCNR(B), it affects how quickly export dollars return to the domestic system. The stated aim is to help businesses manage cash flows more efficiently while maintaining foreign exchange inflows over time.

Parallel discussions on reserve protection as oil pressure grows

Separate from the RBI’s package, the article cites that India is weighing emergency steps to safeguard foreign exchange reserves as higher oil prices strain the current account. Foreign exchange reserves were reported at $190.7 billion as of May 1. Officials in the Prime Minister’s Office and Finance Ministry have held discussions with the RBI on measures that could be taken to limit the fallout from soaring oil prices, according to people familiar with the matter.

Reported options under consideration include curbing non-essential imports such as gold and electronic goods, hiking fuel prices, tightening hedging rules for importers, and measures to push dollars back into the system through exporter repatriation rules. The article also mentions earlier actions to restrict speculation, including capping banks’ daily open foreign exchange positions at $100 million.

Key measures and timelines

Market impact: what changes immediately, and what does not

The most direct near-term impact is on the channels through which dollars can enter the system. FAR expansion and removal of investment limits increase the set of government bonds that can be owned by foreign investors without caps, potentially improving steady demand for sovereign debt. The swap window and FCNR(B) support are explicitly structured to reduce costs for bringing dollars into India, and both run until September 30.

At the same time, the package does not eliminate the underlying drivers cited in the article, especially higher crude prices and investor outflows. The RBI itself indicated the measures are unlikely to immediately reverse the rupee’s decline, but they show a preference for using multiple tools beyond interest rates. The article also notes the RBI has already intervened in markets to stabilise the rupee after it hit record lows, while parallel policy discussions consider demand-reduction measures such as curbing non-essential imports.

Why the package matters for debt markets and liquidity management

Structurally, the FAR move is significant because it increases the share of the government bond market that is unconstrained for foreign ownership, aligning with how global investors typically allocate to index-eligible markets. The reference to inclusion in three major global bond indices underscores the RBI’s intent to make access frictionless for index-linked and benchmarked investors.

The FCNR(B) and swap measures reflect a classic liquidity playbook: reduce hedging and conversion costs to incentivise banks and depositors to bring dollars onshore. But the article also flags that such measures can carry a fiscal-like cost via subsidy mechanics. Standard Chartered’s estimate cited in the article suggests the RBI may need to offer a roughly 2.75 percentage point subsidy over prevailing swap rates for NRI deposits, implying a cost of about $100 million for every $10 billion raised. That estimate frames the trade-off between speed of inflows and the cost of incentivising them.

Conclusion

The RBI’s latest package keeps the repo rate at 5.25% while expanding FAR access to longer-dated government bonds, relaxing investment limits for NRIs and OCIs, and offering swap and FCNR(B) support until September 30 to ease dollar liquidity. The measures sit alongside reported government-level discussions on emergency steps to protect forex reserves, with reserves cited at $190.7 billion as of May 1. The next key marker for markets will be how effectively the time-bound facilities translate into measurable inflows before the September 30 deadline, and whether any of the reported reserve-protection options move from discussion to decision.