RBI Unveils Six Measures to Attract Foreign Investment to India
RBI Unveils Six-Point Package to Boost Capital Inflows
The Reserve Bank of India (RBI) maintained its repo rate at 5.25 percent on Friday, but introduced a slew of measures aimed at attracting foreign capital into the country. The central bank's decision to keep the interest rate unchanged was accompanied by a six-point package aimed at boosting capital inflows into India.
The RBI's announcement came as the bank lowered its forecast for India's real GDP growth in FY27 to 6.6 percent from 6.9 percent earlier, while raising its CPI inflation estimate to 5.1 percent from 4.6 percent. The measures announced by the RBI span the government securities market, foreign portfolio investment rules, overseas Indian equity investments, external commercial borrowings by public sector undertakings, FCNR(B) deposits, and export proceeds realisation norms.
Key Measures to Boost Capital Inflows
Read also: RBI Maintains Repo Rate Amid Global Economic Uncertainty Provides Stability to Realty Sector
The RBI's six-point package includes the following measures:
| Measure | Description |
|---|---|
| 1. Wider foreign access to long-term G-Secs | The RBI expanded the Fully Accessible Route (FAR) to include all new 15-year, 30-year, and 40-year government security issuances. |
| 2. FPI concentration limits removed under general route | The RBI removed investment concentration limits for foreign portfolio investors under the general route. |
| 3. Higher equity investment limits for NRIs and OCIs | The RBI announced higher investment limits for non-resident Indians and overseas citizens of India in listed equities without SEBI registration. |
| 4. Concessional forex swap window for PSU ECBs extended | The RBI extended the concessional forex swap window for external commercial borrowings raised by public sector undertakings till September 30, 2026. |
| 5. Hedging-cost support for FCNR(B) deposits extended | The RBI extended full hedging-cost support for banks raising three- to five-year FCNR(B) deposits till September 30, 2026. |
| 6. Export proceeds realisation period restored to 9 months | The RBI restored the export proceeds realisation period to nine months from 15 months. |
These measures are aimed at making Indian assets and foreign currency channels more attractive without changing the policy rate. The RBI's decision to keep the repo rate at 5.25 percent and maintain a neutral stance avoided a direct rate move, but signaled its intention to strengthen foreign exchange inflows through bonds, deposits, overseas borrowings, equities, and exports.
By introducing these measures, the RBI is attempting to improve the timing of foreign exchange inflows into the country, reduce the period for realising export proceeds, and make Indian assets more attractive to foreign investors. The six-point package is a significant step towards boosting capital inflows into India and supporting the country's economic growth.
Read also: RBI Monetary Policy: Experts Identify Top 8 Stocks for Investment Amid Unchanged Key Interest Rate
Investor Takeaway
The RBI's measures to attract foreign investment may have a positive impact on India's economy, but investors should monitor the country's GDP growth and inflation estimates.
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