RBI forex plan: 5 steps to attract flows in 2026

Why RBI’s latest forex messaging matters

The Reserve Bank of India (RBI) has paired policy messaging on the rupee with a set of measures aimed at improving foreign currency inflows and strengthening the balance of payments. RBI Governor Sanjay Malhotra said the central bank will do “whatever is required” to ensure orderly movements in the foreign exchange market. He also underlined that the RBI does not target any specific level for the rupee but stands ready to intervene if speculative pressures build up.

The context is heightened global uncertainty, including geopolitics referenced in the policy news flow, and the need to maintain orderly price discovery in the currency market. The RBI’s position, repeated in the monetary policy communication, is that intervention is intended to smooth “excessive and disruptive volatility” without defending any particular exchange rate level or band.

Governor Malhotra’s stance on rupee volatility and intervention

In an interview cited by Reuters from Mumbai dated May 25, Malhotra said the RBI will act to maintain orderly market conditions. He added that the RBI does not target any specific currency level, but will intervene if speculative pressures rise. Separately, RBI’s policy communication reiterated the same principle: intervention is aimed at smoothing volatility and not at targeting a level or band.

The RBI also flagged the depth of its toolkit. Malhotra pointed to nearly $100 billion in foreign exchange reserves as available firepower to address undue speculative movement, signalling that the central bank is prepared to use reserves and other instruments when needed.

Five measures announced to bolster forex reserves and foreign investment

Malhotra announced five measures aimed at bolstering forex reserves and attracting foreign investments.

1) FAR widened for long-tenor government bonds; FPI limits eased

The scope of “specified securities” under the Fully Accessible Route (FAR) for government securities is being widened to include all fresh issuances of 15-year, 30-year and 40-year government bonds. In addition, restrictions relating to short-term investments, concentration limits, and exposure to individual securities for foreign portfolio investors (FPIs) under the General Route are being removed.

The RBI governor said these steps, along with tax-related incentives announced by the government earlier the same day, are expected to improve foreign participation in financing government borrowings.

2) Higher equity investment limits for individuals resident outside India

Investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in listed equity instruments traded on stock exchanges without SEBI registration are being enhanced. The same benefit is extended to all individual Persons Resident Outside India (PROIs), placing them on an equal footing with NRIs and OCIs.

3) Concessional FX swap window for PSU ECBs until September 30, 2026

A concessional foreign exchange swap facility will be available until September 30, 2026, to encourage external commercial borrowings (ECBs) by public sector undertakings (PSUs).

4) Similar swap support for AD banks mobilising FCNR(B) deposits

Authorised dealer (AD) banks will be provided a similar facility to cover the full hedging cost for mobilising fresh FCNR(B) deposits with maturities ranging from three to five years. This facility will also remain available until September 30, 2026.

5) Export proceeds realisation period to be reinstated to nine months

The RBI proposed to reinstate the export proceeds realisation period to nine months, a move that can influence the timing of foreign currency inflows from exports.

Forex reserves and select payments-related updates

The article data also notes multiple reserve print points across different dates and sources. India’s foreign exchange reserves reached a record high of $175 billion as of August 2. Another cited level shows reserves at $186.2 billion as on November 28, described as providing over 11 months of import cover. A separate reference states that as on September 26, 2025, India’s foreign exchange reserves stood at $100.2 billion, sufficient to cover more than 11 months of merchandise imports.

On payments, the RBI increased the UPI tax payment limit from Rs 1 lakh to Rs 5 lakh per transaction. And to address unauthorised digital lending apps, the RBI is creating a public repository of Digital Lending Apps (DLAs) associated with RBI-regulated entities.

Monetary policy: repo rate at 5.25% and a neutral stance

The provided text includes policy communication showing the MPC voted unanimously to keep the policy repo rate at 5.25%. Consequently, the standing facility rates cited are: STF at 5% and MSF and the bank rate at 5.5%. The MPC also decided to continue with a neutral stance.

In another set of highlights attributed to a December 5 policy announcement, the repo rate is described as reduced by 25 basis points to 5.25%, with this being the fourth cut totalling 125 bps since February 2025. The same highlights also mention GDP growth forecast for FY26 raised to 7.3% from 6.8%, and inflation estimates lowered to 2% from 2.6%. The next MPC meeting was scheduled during February 4 to 6, 2026.

Liquidity operations: OMOs and USD-INR swaps

Alongside rate actions and guidance, the RBI announced liquidity-boosting measures. These included open market operation (OMO) purchases of government bonds of Rs 1 lakh crore in two tranches of Rs 50,000 crore each, with dates cited as February 5 and February 12. The RBI also announced a three-year dollar-rupee buy-sell swap, cited as $10 billion on February 4 in one reference, and also as $1 billion in other cited summaries.

The text also mentions a 90-day variable rate repo operation of Rs 25,000 crore on January 30.

INR trade settlement push: rupee lending to neighbours and SRVA flexibility

Separately, in a push to promote the use of the Indian Rupee in cross-border settlements, the RBI allowed banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for bilateral trade. The RBI also proposed transparent reference rates for currencies of India’s major trading partners to facilitate INR-based transactions.

It also permitted wider use of Special Rupee Vostro Account (SRVA) balances by making them eligible for investment in corporate bonds and commercial papers.

Key facts at a glance

Market impact: what the measures are designed to influence

The FAR expansion for long-tenor government bonds and the removal of certain FPI restrictions are aimed at broadening the pool of overseas demand for government borrowing. The NRI-OCI-PROI equity limit changes are intended to simplify and widen access for individuals resident outside India in listed equity instruments, within the defined framework.

The two swap-linked measures, one for PSU ECBs and another for FCNR(B) mobilisation, are explicitly aimed at encouraging foreign currency inflows with a defined availability window until September 30, 2026. The export proceeds realisation period being proposed at nine months can affect the timing of export-related inflows.

Analysis: tying intervention stance to inflow measures

RBI’s repeated line that it does not target a specific rupee level is meant to anchor expectations that intervention will be used to address volatility rather than defend an exchange rate. In parallel, the flow-oriented measures focus on improving market access, reducing frictions for certain investor categories, and offering time-bound swap facilities.

Together, the approach reflected in the provided text combines two objectives: (1) reinforce the framework for orderly price discovery in the forex market, and (2) support foreign currency inflows through regulatory changes and swap facilities, while highlighting the level of reserves as a buffer.

Conclusion

RBI Governor Sanjay Malhotra has reiterated that the central bank will intervene to smooth excessive volatility in the rupee without targeting a specific level, while announcing five measures to support foreign inflows and forex reserves. The concessions and rule changes span government securities, overseas individual equity participation, swap facilities for ECBs and FCNR(B) deposits, and export proceeds timelines. Several of these measures, including the swap windows, are explicitly available until September 30, 2026, making that a key date for market participants to track.