05 - 06 - 2026

RBI eases path for global Indian capital to come home

This represents one of the most extensive capital-attraction initiatives in recent times

To support India’s external financing position in the face of global uncertainty, the Reserve Bank of India (RBI) has undertaken one of the most extensive initiatives in recent years, relaxing foreign investment regulations concerning government bonds, equities, external commercial borrowings (ECBs), FCNR(B) deposits, and export proceeds, thereby establishing improving the prospects for capital inflows into the country.

These initiatives coincide with the government’s choice to eliminate capital gains tax on foreign investments in designated government securities, indicating a unified policy effort to draw in foreign capital and strengthen India’s balance of payments.

A significant alteration is the further liberalization of the government securities market. Previously, foreign portfolio investors (FPIs) encountered limitations regarding short-term investments, concentration thresholds, and exposure to individual securities under the General Route. 

The RBI has now lifted these restrictions while also broadening the Fully Accessible Route (FAR) to encompass all new issuances of 15-year, 30-year, and 40-year government bonds. In conjunction with the tax incentives introduced by the government, this greatly enhances the appeal of Indian sovereign debt for international investors and may contribute to a reduction in government borrowing costs over time.

The reforms also expand access to Indian equity markets by increasing investment limits for NRIs and OCIs without necessitating SEBI registration, while extending similar advantages to all individual Persons Resident Outside India (PROIs).

In addition to incentives for ECBs, new FCNR(B) deposits, and the reinstatement of a nine-month export realization window, the package embodies a comprehensive strategy aimed at diversifying India’s sources of foreign capital.

The importance of this initiative lies not only in attracting short-term inflows but also in establishing India as a more accessible and competitive hub for global savings, diaspora wealth, and long-term investment capital.

This represents one of the most extensive capital-attraction initiatives following India’s entry into significant global bond indices.

The aim is not solely to draw in investments, but also to enhance the Balance of Payments, ensure the stability of the rupee, and bolster foreign exchange reserves during a period characterized by volatile oil prices, geopolitical uncertainties, and unpredictable global capital movements.