DBS Group Research notes that the Reserve Bank of India and government unveiled coordinated steps to attract foreign capital and support India’s external position. Measures include widening the Fully Accessible Route for G-secs, liberalising FPI debt taxation, boosting non-resident equity investment, and offering concessional forex swaps and FCNR(B) incentives, which could stabilise the Rupee and lift reserves if sizeable inflows materialise.

Capital inflow push to back Rupee

“The RBI and the government announced a host of coordinated measures to boost inflows and support the capital account math.”

“These ticked all boxes to spur dollar inflows, which is likely to result in reserves accretion and stabilise the currency, signaling all hands are on deck.”

“Ability to attract inflows upwards of $40-50bn will have a meaningful impact on the external balances, with our FY27 BOP estimate at ~$65bn (assuming oil at $85-90bl).”

“Facility under which full hedging costs will be provided (by the RBI) till Sep26 for Authorised dealers (ADs) to raise fresh 3–5-year FCNR (B) deposits.”

“This scheme mirrors the move back in 2013 (discounted swap; attracted $26bn in deposits and $34bn on wider concessional swap facilities) to draw in non-resident deposits but will necessitate a higher subsidy by the RBI in the context of higher US rates currently vs 2013.”

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