RBI measures could pull $50 billion inflows in FY27

What the RBI is trying to achieve

The Reserve Bank of India (RBI) has rolled out a package of measures aimed at attracting foreign capital, improving domestic liquidity, and supporting the rupee amid higher global uncertainty. The central bank kept the repo rate unchanged at 5.25%, while using targeted steps to pull in foreign currency flows through deposits, external borrowings, and easier access to government securities.

Multiple research houses and market participants have put different numbers on the likely impact. Estimates in the reports range from about $10 billion at the low end to as much as $15 billion at the high end, depending on uptake of specific windows and whether India sees deeper participation in global bond indices.

Repo rate unchanged, but the policy mix shifts to inflows

The RBI held the policy rate steady at 5.25% but paired the decision with steps that are explicitly designed to encourage foreign currency inflows and ease funding conditions. Researchers described the announcement as an attempt to shift the “rupee narrative” away from depreciation risk and toward improved inflows.

SBI research said the measures are aimed at “flipping the rupee narrative” and projected capital flows that could support the rupee toward 92-93 levels. Kotak Securities also said the package could improve visibility for overseas funding for India Inc, particularly by lowering hedging and funding frictions.

Key measures: deposits, swaps, and investor access

The announcements described in the reports include:

• A window and incentives around foreign currency non-resident deposits (FCNR(B)), with the RBI compensating banks for hedging costs on three-year and five-year deposits.
• A concessional foreign-exchange swap facility for 3-5 year external commercial borrowings (ECBs) by public sector undertakings (PSUs), available until September 30, intended to encourage overseas borrowing.
• Expansion of the Fully Accessible Route (FAR), giving foreign investors wider access to government securities, including adding new 15-, 30- and 40-year G-secs.
• Removal of the 30% short-maturity limit, and reports also cited the scrapping of limits on short-term investment, concentration, and individual security exposure for FPI investments under the general route.
• A change to export proceeds realisation, restored to 9 months from 15 months, bringing foreign exchange into the system faster.

Alongside the RBI actions, the government also announced tax changes for foreign investors in government bonds. One report said the government will scrap capital gains tax for foreign holders of government bonds and remove the 20% tax on interest earned from such investments, effective from April 1, 2026. Another report said foreign portfolio investors were exempted from income tax on interest income and capital gains from G-secs, with retrospective effect from April 1 this year.

FAR expansion and the bond index angle

A key part of the package is the expansion of FAR, which is closely watched because it links to India’s efforts to deepen its sovereign debt market and broaden the foreign investor base. ICICI Bank Global Markets said the changes, together with the FAR expansion, could pave the way for Bloomberg index inclusion.

Analysts cited in the reports estimated about $15 billion of additional debt inflows if such index inclusion materialises. The same set of reports also noted that recent tax incentives on bond investments could strengthen India’s prospects for deeper integration with global debt markets.

What analysts estimate: from $10 billion to $15 billion

The estimates vary by institution and by how each one breaks down the components.

ICICI Bank Global Markets was cited in the reports for estimating that the measures could attract nearly $10 billion in inflows in one instance, while another passage attributed an estimate of nearly $10 billion from specific swap and borrowing windows. The reports also stated that the FCNR(B) window could deliver the biggest and fastest flows, and that the PSU ECB swap facility could be another major contributor.

SBI Research and Kotak Securities published their own ranges, and other bank economists also published balance-of-payments-linked estimates for FY27.

Immediate market reaction: rupee firmer, yields lower

The reports said markets reacted quickly after the announcement. The rupee appreciated by 50 paise. Government bond yields in the 10-40 year segment fell by 4-5 basis points, while 2-3 year corporate bond yields fell by 20-25 basis points. The overnight indexed swap (OIS) curve was reported to be down 10-15 basis points.

These moves were framed as a response to expectations of higher foreign inflows, improved rupee liquidity, and reduced near-term funding stress in domestic markets.

Balance of payments context for FY27

Economists linked the measures to projected balance of payments (BoP) needs in FY27. HDFC Bank’s Sakshi Gupta said the combined impact could help bridge a $10-50 billion BoP gap estimated for FY27, based on assumptions including a current account deficit of 2.1% of GDP and average crude oil prices of $10 a barrel.

YES Bank’s Indranil Pan estimated $15-45 billion as a reasonable inflow estimate, which he said could be close to closing the anticipated FY27 BoP gap. Another line in the reports cited a $10-50 billion BoP gap estimate for FY27, with the same HDFC Bank economist referenced.

Separately, Barclays’ Mitul Kotecha said India may require roughly $1-8 billion per month in capital inflows to balance the BoP. He added that while the measures may add up to about $1 billion per month of incremental inflows over the next few months, it would not fill the gap entirely.

What it means for banks, borrowers, and offshore funding

The deposit and swap windows are designed to attract dollars while controlling hedging costs and smoothing liquidity. Kotak noted that the PSU ECB swap facility could provide a breather to domestic capital markets and improve visibility for India Inc overseas.

The reports also linked the concessional FX swap window to the possibility of accelerating overseas borrowing by PSUs such as PFC, REC and NTPC, after ECB/FCCB flows were reported to have fallen 30% in FY26 to $12.9 billion.

Rate outlook: differing views across research desks

On the policy outlook, SBI said the RBI may “look through inflation prints” and expected an August pause, with growth considerations taking priority over aggressive hikes. Kotak, however, cited about 50 basis points of hikes as likely in FY27 given an inflation projection of 5.1%, while also noting that markets have already discounted 50-75 basis points.

Conclusion

The RBI’s decision to keep the repo rate steady at 5.25% came with a clear focus on attracting foreign capital through deposit incentives, concessional FX swaps, and broader foreign investor access to government securities. Research estimates in the reports cluster around $10-50 billion, with wider ranges of $10-75 billion depending on uptake and market conditions. A further ~$15 billion of debt inflows was discussed as a possibility if Bloomberg bond index inclusion materialises, which remains a key variable markets will track.