Mumbai: The Reserve Bank of India and the government simultaneously announced several steps on Friday aimed at attracting overseas funds into domestic debt markets and supporting the rupee, following ongoing foreign portfolio outflows and heightened global risks.
The steps cover expanded foreign access to government securities, tax relief on sovereign bond holdings, eased investment rules for overseas investors, and raised equity limits for foreign individuals.
Key actions include the RBI broadening securities under the Fully Accessible Route to cover all new 15-year, 30-year and 40-year government bonds. Sovereign green bonds were also added to the FAR framework, permitting foreign investors to buy designated securities without limits.
The government exempted foreign portfolio investors from income tax on interest and capital gains from government securities starting 1 April 2026.
The RBI removed sub-limits on short-term holdings, concentration and individual securities for FPI investments under the general route. Overall ceilings of 6 percent for central government securities and 2 percent for state securities remain. The general and long-term FPI categories will merge into one for both central and state bonds.
These actions, combined with tax benefits, should help attract foreign capital for government borrowing, the RBI governor stated.
Analysts noted the tax relief could lift FPI returns on Indian bonds by 15-20 percent, improving appeal and supporting global index inclusion. Coordinated measures aim to ease rupee pressure and address an estimated $40-50 billion balance of payments gap for FY27.
Equity rules were also relaxed. Persons resident outside India may now invest in listed equities via the Portfolio Investment Scheme, previously limited to NRIs and OCIs. Individual caps rose to 10 percent of paid-up capital from 5 percent, with aggregate limits increasing to 24 percent from 10 percent.
Further steps to encourage dollar inflows include a concessional forex swap facility for public sector units raising external commercial borrowings until 30 September 2026, and the RBI covering hedging costs for fresh three-to-five-year foreign currency deposits until the same date. Export proceeds realisation time was restored to nine months.
