RBI inflow measures 2026: FAR, swaps, NRI caps plan

What the RBI announced and why it matters

The Reserve Bank of India (RBI) Governor Sanjay Malhotra said the central bank is rolling out five measures to attract foreign capital inflows and strengthen India’s balance of payments. The announcement comes at a time when portfolio flows have been weak, with net portfolio flows recording outflows of nearly USD 14 billion till June 2, 2026, primarily from the equity segment. The RBI framed the package around easing access to government securities, widening overseas participation in listed equities, and lowering hedging costs for select foreign currency borrowings and deposits. Separately, the government has also moved on tax measures that could improve the post-tax attractiveness of government securities for foreign investors. The measures provide specific timelines for concessional forex swaps and signal a policy tilt towards making India’s capital account channels more resilient.

Portfolio outflows and the reserve cushion

Malhotra said India’s foreign exchange reserves stood at USD 682.3 billion as of May 29, 2026. He added the reserve stock provides an import cover of around 11 months and covers over 89% of external debt. These indicators are often tracked by global investors as a buffer against external shocks and as a comfort factor during periods of risk-off flows. The RBI’s focus on inflows, especially into government securities and longer-tenor issuances, also reflects the need to diversify foreign participation beyond equity portfolio flows. The central bank’s measures are positioned as supportive of balance of payments stability, rather than as a response to any single market move.

Fully Accessible Route expanded to longer tenors

A key measure is the expansion of the Fully Accessible Route (FAR) for government securities. The RBI said it has expanded the universe of government securities eligible under FAR by including all new issuances of 15-year, 30-year and 40-year tenor securities during 2026. Until now, FAR eligibility was largely limited to government securities up to the 10-year tenor. The change matters because longer-tenor bonds can attract long-duration global investors such as pension funds and insurers, where mandates often prefer liquid benchmark maturities and predictable eligibility. By covering new issuances in these tenors during 2026, the RBI is aiming to improve the investible universe under a route that allows unrestricted foreign investment.

Removing certain foreign investment limits under the general route

In addition to expanding FAR, the RBI has removed limits related to short-term investments, concentration, and individual securities that were applicable to foreign investments under the general route. These constraints can affect how global portfolios size and manage positions, particularly for index-tracking funds that need flexibility in security selection. Malhotra said the measures, together with the government’s recent tax benefits for government securities, are expected to enhance foreign participation in government borrowing. The combined effect is designed to reduce friction for foreign investors deciding between FAR-eligible paper and the general route.

Overseas individuals: higher equity limits without SEBI registration

Another major change is on overseas participation in listed equities through a simplified route. The RBI has increased investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in listed equity instruments without requiring SEBI registration. The same facility is being extended to all individual persons resident outside India, putting them at par with NRIs and OCIs for this purpose. As per the details provided, the individual investment cap in listed Indian equity instruments without SEBI registration is being raised from 5% to 10%, and the aggregate limit is being increased from 10% to 24%. The limits apply to shares and convertible debentures purchased on recognised stock exchanges.

Budget 2026: direct equity investing via the Portfolio Investment Scheme

The Union Budget 2026 also outlined a new route for overseas individuals to invest directly in Indian equities through the RBI’s long-standing Portfolio Investment Scheme (PIS). Finance Minister Nirmala Sitharaman said foreign individuals will be able to invest through the portfolio route, and the speech proposed the same higher limits: 10% per investor and 24% aggregate. Under the operational framework described, applicants will complete KYC with a designated bank and receive a unique investor code linking overseas remittance accounts to domestic brokerages. Officials cited in the provided context said the objective is to diversify foreign capital sources by attracting overseas retail investors, at a time when FPIs have pared exposure due to valuation concerns and global uncertainties.

Concessional forex swaps for ECBs and FCNR(B) deposits

On the external funding side, the RBI announced a concessional forex swap facility that will be available until September 30, 2026, to encourage external commercial borrowings (ECBs) by public sector undertakings. The RBI also said it will provide a similar facility to authorised dealer banks by bearing the full hedging cost for mobilising three-to-five-year Foreign Currency Non-Resident Bank deposits, FCNR(B), until September 30, 2026. In practical terms, these measures are aimed at reducing hedging-related costs that can deter borrowers or banks from tapping foreign currency resources, especially when volatility and hedging premia rise. The specific end-date provides a defined window for eligible entities to plan fund-raising.

Export proceeds: proposal to restore a shorter realisation window

The RBI has proposed restoring the export proceeds realisation period to nine months from the current 14 months. This is a trade-related foreign exchange measure that typically affects how quickly export-linked inflows return to the domestic banking system. A shorter realisation period can improve the timing of forex inflows and tighten compliance expectations for exporters. Malhotra said the overall package is expected to strengthen India’s balance of payments and support capital inflows.

Tax change under discussion: capital gains on FPI G-sec investments

Alongside the RBI measures, the provided context says the Union Cabinet, led by Prime Minister Narendra Modi, has reportedly approved an ordinance amending the Income Tax Act to eliminate capital gains tax on investments made by foreign portfolio investors (FPIs) in Indian government securities. It will be implemented after Presidential approval, as per sources cited. Another source reference in the material mentions scrapping a 12.5% long-term capital gains tax on government bonds held for more than a year. If implemented as described, this could improve post-tax returns and potentially complement the RBI’s steps to broaden foreign participation in government borrowing.

Summary table of the announced steps

Market and investor takeaways

The package targets multiple channels that matter for external financing: government borrowing, overseas retail participation in equities, foreign currency deposits, and external commercial borrowings. Expanding FAR into longer tenors can matter for global bond allocation decisions because it increases the set of securities that can be held without investment caps under that route. Raising equity caps for persons resident outside India, and operationalising access via PIS, broadens the pool of potential overseas investors beyond the registered FPI route for individuals. The swap and hedging measures create a time-bound incentive to mobilise foreign currency resources, which can support balance of payments inflows when portfolio flows are volatile. The RBI also anchored the announcement in the current external position, highlighting reserves of USD 682.3 billion and stated import cover and external debt coverage metrics.

Conclusion

The RBI’s five measures combine market-access changes, higher overseas equity limits, and time-bound forex swap support to improve the ease and economics of bringing foreign capital into India. The announced deadlines, especially the September 30, 2026 window for concessional swap and FCNR(B) hedging support, give institutions clear operational timeframes. Further clarity will hinge on implementation details under the PIS route and any final government notifications on the reported capital gains tax ordinance after Presidential approval.