RBI six-step plan to boost India dollar inflows in 2026

Policy decision and the focus on capital inflows

The Reserve Bank of India (RBI) kept the policy repo rate unchanged and retained its monetary policy stance at neutral, while unveiling a multi-part package aimed at boosting capital inflows. One report pegged the unchanged repo rate at 5.25%, while another described the policy rate as retained at 5.5%. Alongside the rate decision, the RBI announced a six-point package designed to improve foreign exchange inflows and broaden foreign participation in Indian markets. The measures spanned foreign investor access to government securities, foreign portfolio investment (FPI) rules, equity investment rules for overseas Indians, external commercial borrowings (ECBs) by public sector undertakings (PSUs), FCNR(B) deposits, and export proceeds realisation norms.

Why the RBI moved now

The RBI’s steps were framed as an attempt to pull in dollars at a time when the rupee was under pressure amid costly oil and foreign outflows. A Reuters report said the central bank was seeking to shore up an “embattled rupee” as the economy grappled with expensive oil. It also said the RBI was studying additional ways to mobilise dollar inflows to bolster foreign exchange buffers and cushion pressure linked to a spike in oil prices driven by the Iran war. Separately, sources cited by Reuters said options under discussion included reviving a mechanism used in 2013 to draw in dollar deposits from non-resident Indians (NRIs) and removing a 5% withholding tax on overseas government bond investors, but stressed that no final decision had been taken and any move would be made in consultation with the government.

Measure 1: FAR widened for long-term government bonds

The RBI expanded the Fully Accessible Route (FAR) to include all new 15-year, 30-year and 40-year government security issuances. FAR is the framework under which specified government bonds have no foreign investment restrictions. By adding longer-tenor issuances, the RBI effectively widened foreign investors’ access to long-duration Indian sovereign debt. The stated intent was to deepen overseas participation in India’s sovereign bond market and broaden the investor base for longer-maturity securities.

Measure 2: FPI concentration limits removed under the general route

The central bank removed investment concentration limits for foreign portfolio investors under the general route. The change is intended to ease constraints that can restrict position building and portfolio construction for FPIs. While the article did not specify the earlier thresholds, it clearly stated the concentration limits were removed for FPIs under this route.

Measure 3: Higher equity investment limits for NRIs and OCIs

The RBI announced higher investment limits for NRIs and overseas citizens of India (OCIs) in listed equities without SEBI registration. The facility was also extended to all resident individuals abroad, widening the pool of eligible overseas investors who can participate in India’s listed equity market under the revised framework. In a separate report on related policy thinking, a proposal was mentioned to raise the investment cap for individual foreign investors including NRIs in listed Indian companies from 5% to 10%, and the combined ceiling for overseas individuals from 10% to 24%, described as “expected” if implemented.

Measure 4: Concessional forex swap window for PSU ECBs

The RBI extended the concessional forex swap window for ECBs raised by PSUs until September 30, 2026. A separate report also said the RBI would offer concessional forex swaps “until September 30” to encourage state-owned firms to tap dollar borrowings, without stating the year in that sentence. The swap facility is positioned as a way to lower effective hedging or conversion costs for overseas borrowings, which can support dollar inflows through the ECB channel.

Measure 5: Hedging-cost support for FCNR(B) deposits

The RBI extended full hedging-cost support for banks raising three- to five-year FCNR(B) deposits until September 30, 2026. FCNR(B) deposits are foreign currency deposits mobilised by banks from NRIs, and hedging-cost support can make it easier for banks to raise such deposits by offsetting currency risk management costs. Separately, the RBI had earlier increased interest rate ceilings on FCNR(B) deposits effective December 6, 2024, allowing banks to raise fresh FCNR(B) deposits of 1 year to less than 3 years at rates not exceeding ARR plus 400 bps, and deposits of 3 to 5 years at rates not exceeding ARR plus 500 bps, with that relaxation available until March 31, 2025.

Measure 6: Export proceeds realisation period restored to 9 months

The RBI restored the export proceeds realisation period to nine months from 15 months. That means exporters must bring back export earnings within nine months again, reducing the earlier flexibility. The measure can improve the timing of foreign exchange inflows, though it also tightens the window exporters previously had.

Government tax changes announced alongside the RBI steps

Alongside the RBI’s announcement, the government said it will scrap capital gains tax for foreign investors and remove the 20% tax on interest earned from such investments, with the exemption set to take effect from April 1, 2026. The same report noted that foreign investors are subject to a 12.5% long-term capital gains tax on listed shares and bonds held for more than 12 months. In parallel, the RBI widened the set of government bonds that have no foreign investment restrictions.

Broader structural measures also reported with the policy package

Another account of the policy package highlighted steps beyond capital inflows, including easing corporate financing rules and market deepening initiatives. It reported a relaxation of restrictions under the 2016 “large-exposure” framework, raising the ceiling for loans against shares from ₹2 million to ₹10 million per individual, and increasing IPO financing limits from ₹1 million to ₹2.5 million. It also described reduced risk weights on NBFCs lending to operational infrastructure projects, and changes to trade and settlement rules including extending the repatriation period for foreign currency accounts from one month to three months, lengthening merchant trade transaction timelines from four months to six months, and allowing entries valued at ₹1 million or less to be closed on a simple declaration.

Rupee internationalisation measures mentioned in the reports

The RBI also announced measures to expand the rupee’s use in cross-border transactions. Indian banks were permitted to extend rupee-denominated loans to non-residents in Bhutan, Nepal and Sri Lanka to support trade activities. It was also stated that surplus balances in Special Rupee Vostro Accounts (SRVAs) may be invested in corporate bonds and commercial paper, rather than being restricted to government securities. Separately, the RBI said it would provide reference exchange rates for major currencies to support transparency and confidence in currency markets.

Key measures at a glance

Market impact and what investors will watch

The package targets multiple channels of foreign exchange inflows: debt portfolio flows through FAR and FPI easing, bank deposits through FCNR(B) incentives, and borrowings via ECB-related swap support. The export realisation change brings forward the timeline for converting export receivables into actual foreign currency inflows. For bond market participants, the FAR expansion for longer-tenor government securities may increase potential foreign demand for newly issued long-duration paper by removing investment restrictions under that route. For banks, extended hedging-cost support may influence how aggressively they mobilise three- to five-year FCNR(B) deposits. Investors will also track the government’s planned tax changes from April 1, 2026, since they directly affect post-tax returns for foreign investors in these instruments.

Conclusion

The RBI’s rate hold was paired with a wide set of steps aimed at attracting and smoothing dollar inflows through bonds, deposits, and overseas borrowing channels, while also tightening export proceeds timelines. The forex swap and FCNR(B) hedging support were explicitly extended until September 30, 2026, and the government’s tax exemptions were slated to start on April 1, 2026. Separate reports also indicated additional ideas were being studied, including a revival of an NRI deposit mechanism last used in 2013 and a possible change to withholding tax, though sources said no final decisions had been taken and discussions would involve the government.