RBI measures to revive foreign inflows: 5 moves in 2026

Why policymakers are focused on foreign inflows

India’s policymakers are sharpening their focus on bringing foreign capital back after recent outflows and renewed pressure on the balance of payments and the rupee. Finance Minister Nirmala Sitharaman said the steps announced by the Reserve Bank of India (RBI) and the government are the “first step” to revive foreign capital, while signalling that more measures could follow. She made the comments at the Mindmine Summit 2026, positioning the latest set of actions as part of a broader effort rather than a one-off intervention.

A key part of that effort is to make Indian government bonds and listed markets easier to access, cheaper to comply with, and more predictable for overseas investors. Policymakers are also using time-bound foreign exchange swap facilities to manage currency risk for banks and public sector borrowers. Alongside these changes, discussions are underway on further policy adjustments, including tax and manufacturing-related reforms.

Sitharaman’s bond market pitch and the FAR expansion

At the Mindmine Summit 2026, Sitharaman said RBI and government analysis suggests India’s bond market can be a “very good magnet” for foreign capital. In line with that view, the government expanded the list of specified securities under the Fully Accessible Route (FAR) on June 5 to include new issuances in government securities. The policy intent is to reduce the compliance burden for foreign investors in government bonds and deepen participation.

The government also announced income tax exemption for foreign portfolio investors (FPIs) on income from interest and capital gains made from investments in government securities. Separately, the government has said these tax benefits for government securities are effective from April 1, 2026. Taken together, the package links easier market access with direct post-tax return improvements, both of which are key inputs for foreign participation in sovereign debt.

RBI Governor Malhotra’s five-measure package

RBI Governor Sanjay Malhotra announced five measures aimed at attracting foreign capital inflows. The measures include expanding the FAR universe, easing investment norms for overseas investors, and providing concessional forex swap facilities for external borrowings and FCNR deposits. The RBI framed these steps as supportive of India’s balance of payments and capital inflows.

One major change is in the FAR universe. The RBI expanded the set of government securities eligible under FAR by including all new issuances of 15-year, 30-year and 40-year tenor securities during 2026. In addition, limits related to short-term investments, concentration, and individual securities that apply to foreign investments under the general route were removed. The RBI said these steps, combined with the government’s tax benefits for government securities, should enhance foreign participation in government borrowing.

How overseas individual equity investing rules are being liberalised

The RBI also 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, placing them on par with NRIs and OCIs.

The Union Budget FY 2026-27 also set out a related change: individual Persons Resident Outside India (PROI) will be permitted to invest in equity instruments of listed Indian companies through the Portfolio Investment Scheme, a route earlier limited to NRIs and OCIs. Under this scheme, the investment limit for an individual PROI in any company will rise from 5% to 10%, and the overall investment limit for all individual PROIs will rise from 10% to 24%. The government said this is intended to mobilise foreign portfolio capital by leveraging existing onboarding systems for NRI/OCI investors, while simplifying onboarding and reducing compliance.

Swap facilities for FCNR(B) deposits and PSU ECBs

Alongside market-access reforms, the RBI is deploying time-bound currency tools. On June 5, the RBI allowed banks to access the RBI’s swap facility for Foreign Currency Non-Resident (Bank) deposits with maturities ranging from 3 to 5 years until September 30. The facility allows banks to swap US dollar deposits with the RBI and manage currency risks.

In addition, to shore up foreign capital inflows, the RBI introduced a forex swap facility to encourage public sector undertakings (PSUs) to raise external commercial borrowings (ECBs) until September 30, 2026. 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 FCNR(B) deposits until September 30, 2026. These measures are explicitly time-bound, indicating a focus on near-term external financing conditions and currency-risk management.

Export proceeds timeline proposed to revert to nine months

Another element in the RBI package is a proposal to restore the export proceeds realisation period to nine months from the current 14 months. While this is not a market-access reform, it is aimed at strengthening the balance of payments by accelerating the cycle through which export earnings are realised. The RBI’s statement linked this to supporting capital inflows and external-sector stability.

What officials are discussing next: FDI, manufacturing and currency tools

Government sources have previously indicated that more measures to increase FDI flows are in the offing, with the stated objective of bolstering forex reserves and stabilising the rupee. India is also considering new policies to attract foreign capital following recent investment outflows. Options under discussion include strengthening manufacturing incentives for electronics and pharmaceuticals, simplifying tax structures, and improving the ease of participation in Indian markets.

Authorities are also considering a dedicated dollar-swap facility for oil refiners to manage pressure on the rupee. In parallel, policy discussions include the tax treatment of capital gains, with a proposal to align rules with international norms where foreign investors currently face taxes on assets in India even if their global base is in a tax-neutral jurisdiction. Economists have also highlighted the inverted duty structure, where import taxes on finished goods are lower than those on raw materials, as a factor that discourages local manufacturing.

Key measures and limits at a glance

Market impact: what these steps change for foreign investors

The combined package targets three practical barriers for foreign investors: access, compliance, and currency risk. Expanding FAR eligible securities and removing certain general-route restrictions can make it easier for foreign investors to build positions across the curve, which policymakers say can help develop a smoother yield curve. The government’s tax exemption on interest and capital gains for FPIs in government securities directly changes post-tax returns, which can matter for long-duration allocations.

On equities, widening the Portfolio Investment Scheme access to all individual persons resident outside India and raising the limits gives overseas individuals a clearer route with higher caps, without requiring SEBI registration. That can broaden the base of foreign portfolio capital through existing onboarding systems. Meanwhile, the time-bound swap and hedging measures are designed to address currency-risk frictions, especially for banks mobilising FCNR(B) deposits and for PSUs raising ECBs.

What market participants and economists are emphasising

Several market voices cited in the broader discussion have highlighted the importance of predictability. Akshat Garg, Head of Research and Product at Choice Wealth, said macro stability is a key trigger for foreign investors, including strong growth, controlled inflation, and a relatively stable rupee. He also stressed that investors prefer predictable tax rules, regulations, and capital market policies.

Dharmesh Mehta of DAM Capital Advisors argued that policy stability is important, noting that frequent tax changes and regulatory tweaks can hurt investor sentiment. Arvind Sanger, Managing Partner at Geosphere Capital Management, said India needs to address tax “irritants” and focus on supply-side reforms, calling the tax charged at the fund level a deterrent for FPIs. In the same debate around reforms, Vikas Pershad of M&G Investments said the reforms create a more accessible environment, while Ian Simmons of Fiera Capital said confidence depends on deeper bureaucratic, judicial, and tax reforms tied to ease of doing business.

What the Economic Survey adds to the policy direction

The Economic Survey called for a multi-pronged strategy to strengthen India’s investment climate, noting the challenge of sustaining FDI inflows amid global volatility. It argued for proactive reforms, targeted strategies focused on specific global value chain anchors, and a state apparatus that works directly with large investors to resolve cross-agency issues. It also emphasised that incentives must be reliably implemented, and that a single, empowered centre of accountability could improve credibility for long-horizon investors.

The survey also underscored the importance of centre-state coordination and predictability, suggesting every policy change should pass a necessity test to meet predictability and sustainability parameters. It pointed to the role of streamlined regulations and reduced bureaucratic procedures in sustaining ease-of-doing-business gains. It also flagged that India’s credit rating upgrades can be leveraged, citing a historical correlation between foreign investment and sovereign ratings.

Conclusion: a first step, with more decisions expected

Sitharaman has framed the June measures as a first step to bring back foreign capital, with more possible steps ahead. The RBI’s five measures combine bond market access reforms, liberalised overseas individual equity participation, and time-bound forex tools for ECBs and FCNR(B) deposits, alongside a proposal on export proceeds timelines. With additional proposals under discussion, including tax alignment, manufacturing incentives, and a potential dollar-swap facility for oil refiners, the next set of decisions will be closely watched for signals on policy stability and implementation.