During the post-monetary policy conference here, RBI Governor Sanjay Malhotra said the central bank was not targeting any specific amount of inflows from the measures, but remained optimistic that the combined package would generate substantial overseas capital.
“We don’t have a specific number. Obviously, all put together, it (inflow) will be very high,” Malhotra said.
Also Read: RBI policy press conference: Here’s everything that came up for discussion
The RBI announced multiple measures to attract foreign capital across government securities, overseas borrowings, foreign currency deposits and equity investments.
Among the key measures, the RBI expanded the investment universe for foreign investors in government bonds under the Fully Accessible Route (FAR) by including all new issuances of 15-, 30- and 40-year government securities as ‘specified securities’. It also removed limits related to short-term investment, concentration and individual securities for foreign portfolio investors (FPIs) investing under the General Route.
“These measures, along with the tax benefits provided by the government this morning, should help attract foreign capital for government borrowing,” Malhotra said in the policy statement.Also Read: India likely to outpace RBI growth forecasts, says World Bank’s Neelkanth Mishra
The RBI also increased limits for investments by non-resident Indians (NRIs) and overseas citizens of India (OCIs) in listed equity instruments without Securities and Exchange Board of India (SEBI) registration. The same facility has been extended to all individual Persons Resident Outside India (PROIs).
To incentivise external financing, the central bank announced a concessional foreign exchange swap facility until September 30, 2026, for public sector undertakings (PSUs) raising funds through external commercial borrowings (ECBs).
Further, authorised dealer (AD) banks will be allowed a facility for bearing the full hedging cost on fresh three-to-five-year Foreign Currency Non-Resident Bank (FCNR-B) deposits until September 30, 2026. The RBI also proposed restoring the time period for realisation of export proceeds to nine months.
Malhotra said the RBI expected healthy flows not only from ECBs and FCNR(B) deposits during the temporary window but also from measures aimed at attracting equity and government bond inflows.
“We are hopeful of reasonable… healthy flows, both from ECB and other various measures announced today,” he said.
“All those put together, we are quite confident of a much better balance of payments this year as compared to what it would have been otherwise,” he said.