The Reserve Bank of India introduced new measures to attract foreign capital inflows by exempting specific deposits and swaps from forex position limits [1].
These policy shifts aim to support the value of the rupee and improve India's current-account position by making it more attractive for banks to raise foreign-currency borrowings [1, 2].
Under the new guidelines, the RBI has exempted FCNR(B) deposits and external commercial borrowing (ECB) swaps from forex position limits [1, 2]. The central bank also introduced concessional forex swap facilities and will bear the full hedging cost on foreign-currency deposits [2, 3]. Additionally, the RBI will bear a 1.5% swap cost on foreign-currency borrowings [4].
To further encourage mobilization, the central bank extended public sector unit (PSU) dollar swaps until December and provided cash reserve ratio (CRR), and statutory liquidity ratio (SLR) relief for FCNR(B) deposits [2].
Financial analysts and bankers are projecting significant capital movement resulting from these changes. Some experts said the measures could generate between $40 billion and $60 billion in capital inflows [4]. Other banking sources said a lower range of $30 billion to $50 billion in foreign exchange could be attracted via the RBI-subsidized hedging [3].
These moves follow a period of volatility in global markets. India recently posted a $7.10 billion current-account surplus in the fourth quarter of fiscal year 2026 [4]. The country also recorded a capital account surplus of $1.6 billion during that same period [4].
By reducing the cost and regulatory burden for banks to hold foreign currency, the RBI intends to create a more robust buffer against external shocks, a strategy designed to stabilize the domestic economy against currency fluctuations [1, 2].
“The RBI will bear a 1.5% swap cost on foreign-currency borrowings”
The RBI is aggressively lowering the barriers for foreign capital to enter the Indian banking system by absorbing the costs typically borne by commercial lenders. By subsidizing hedging and easing position limits, the central bank is attempting to artificially increase the attractiveness of the rupee-denominated environment to ensure a steady stream of foreign exchange, which is critical for maintaining trade stability and currency valuation.
