As the central government removed all taxes on investment in Government securities for foreign investors, the Reserve Bank of India (RBI) on Friday followed it up with a series of announcements aimed at attracting foreign capital and strengthening India's balance of payments as rising geopolitical tensions, elevated energy prices and global market volatility weigh on emerging market capital flows.
The most significant measure relates to foreign investment in government securities. The RBI said it would expand the universe of securities eligible under the Fully Accessible Route (FAR) by including all new issuances of 15-year, 30-year and 40-year government bonds.
The central bank has also removed limits relating to short-term investments, concentration and individual securities for foreign portfolio investors (FPIs) investing under the General Route.
The move comes hours after the government promulgated an ordinance exempting foreign institutional investors and the Bank for International Settlements (BIS) from tax on interest income and capital gains arising from investments in government securities.
"These measures along with the tax benefits provided by the government this morning should help attract foreign capital for government borrowing," said the RBI governor Sanjay Malhotra in his monetary policy statement.
In another major relaxation, the RBI increased investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in listed equity instruments without requiring Securities and Exchange Board of India (SEBI) registration. The same facility has now been extended to all individual Persons Resident Outside India (PROIs), bringing them on par with NRIs and OCIs.
To encourage external commercial borrowings (ECBs), the RBI announced a concessional foreign exchange swap facility for public sector undertakings until September 30, 2026. The facility is expected to lower hedging costs and make overseas borrowings more attractive.
The central bank also unveiled a similar scheme for banks, under which it will bear the full hedging cost for fresh Foreign Currency Non-Resident Bank [FCNR(B)] deposits with maturities of three to five years raised until September 30.
Further, the RBI restored the time limit for realisation of export proceeds to nine months, a move aimed at supporting exporters and improving foreign exchange receipts.
The measures come at a time when foreign portfolio flows have remained under pressure. According to RBI data, net FPI outflows stood at $13.7 billion between April 1 and June 2, 2026, largely driven by equity market withdrawals. At the same time, rising crude oil prices and global trade disruptions have increased concerns over India's current account deficit.
The central bank said the latest measures, coupled with ongoing reforms such as liberalisation of external commercial borrowing norms, easing of FDI restrictions and expansion of trade agreements, are expected to support capital inflows and strengthen the country's external financing position.
