It was 5 June 2026 when India set about fortifying its external position. The Reserve Bank of India left the repo rate where it was at 5.25% but put its energies into opening up government bond access to the world and putting some extra funding on the table for banks and public sector outfits.
There is a lot of competition for global capital these days. With the RBI’s new rules and the government’s offer of tax relief on securities, the message is clear: we want to be the place to put your money even as crude prices run hot, the rupee softens and you have to factor in some geopolitical headwinds.
Why the RBI is acting now
The trouble in West Asia has driven up the price of oil, and with it, India’s import tab and the need for hard currency. The rupee has been pushed to all-time lows versus the dollar as overseas investors have siphoned off billions from our equities, and the strain on the current account has been palpable.
RBI Governor Sanjay Malhotra sees this as a way to put some muscle behind our external balances. “All these measures together should help attract foreign capital for government borrowing,” he put it. He also made it plain that the central bank wants to shore up foreign currency liquidity, not hit a moving target on the exchange rate.
What changes for investors
You can now put your hands on longer-dated sovereign debt. Any new 15-, 30- or 40-year G-Secs are fully open to the overseas crowd. We’ve also done away with some of the red tape on short-term and concentrated holdings.
We want to make Indian paper something you can invest in at any maturity with less of a hassle. That works in tandem with the tax perks the government put out on the same day – a one-two to put the risk-reward in our court.
Equity is no different. We’ve hiked the limits for non-resident Indians and other overseas citizens in listed stocks; they don’t have to go through SEBI to do it. In fact, any individual living outside India can take advantage of it.
Here is the gist of what we have put in place:
– 15-, 30- and 40-year G-Secs are now within reach
– A few bond investment caps have been let go
– Overseas individuals have a freer hand with equities
Liquidity backstops and funding channels
Public sector companies can use a concessional FX swap for their external commercial borrowings until 30 September. Banks will have the same option for non-resident deposits in foreign currency, with the RBI covering the hedging side of things.
We are also straightening out the cash cycle for exporters. The 15-month window to bring in earnings has been put back to nine months. It’s about keeping the supply of foreign exchange steady without being too heavy-handed with trade.
Policy stance on the rupee
Malhotra has been consistent on how we view the currency. “We do not target any specific level or band. Instead, we allow the exchange rate to be determined by market forces.” Of course, if there is too much volatility from speculation, we will step in.
It is about having the right mix of liquidity and access rather than just throwing up a wall. We want to let the market find its price while we provide a cushion for the rupee.
What to watch next
You will see if the big funds start buying up the longer-tenor G-Secs and whether our swap facility gets PSUs and banks to do more overseas borrowing. Either way, it means more dollars in the system and a better balance of payments.
The risks are still there. You have to look at the oil situation, what the Middle East is up to and how willing foreign money is to take on risk. But we believe our tools for access and stability will make the home market more of a proposition and put some buffer in place.
And we are not done yet. “We will continue to make the right policy adjustments as may be required to further promote exports and attract and incentivize capital inflows,” Malhotra said.
