NEW DELHI: Finance Minister Nirmala Sitharaman on Monday said the government is taking a calibrated approach to attract more foreign capital and may introduce additional measures if required to increase capital inflows.
Speaking at the Mindmine Summit 2026, Sitharaman said, “We recognise we need more foreign capital to come, but the fact that RBI has emerged, the fact that RBI has now allowed public sector, undertaking and banks to go out and pick money from outside, giving them a framework, and in that framework, the very important aspect is that the hedging is at the RBI's expense.”
The Union finance minister said participating entities would not have to bear the cost of hedging against exchange-rate volatility. “They don't have to hedge for the risks, particularly the currency-related risk, the volatility, the exchange rate risk,” she said, adding that this would enable banks to “go unfettered” in raising capital from international markets.
To attract more foreign capital, the Reserve Bank of India (RBI) has introduced a forex swap facility to encourage banks to raise FCNR(B) deposit rates. Under the facility, the RBI will absorb the full hedging cost for banks on deposits with maturities of three to five years and exempt fresh deposits from reserve requirements. Following the move, banks have raised FCNR(B) deposit rates.
Sitharaman said the measures are part of a broader strategy to ensure adequate investment flows into domestic markets while maintaining financial stability.
“We have taken a very calibrated approach to make sure that the markets do receive the required investments,” she said.
The finance minister also highlighted the concessional withholding tax regime as a measure to attract overseas investors.
“The withholding tax treatment which we offer, we think will be the first step towards drawing some capital back,” she said, while indicating that further measures could be considered. “That is not the end of the story,” she added.
