RBI's Foreign Capital Measures Attract USD 39 Billion Inflows: Governor Malhotra

New Delhi, Jul 27 (KNN) The Reserve Bank of India's (RBI) recent measures to attract foreign capital have received a strong response, with banks mobilising nearly USD 32 billion, largely through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits, RBI Governor Sanjay Malhotra has said.

He added that government securities have attracted over USD 7 billion in foreign inflows since the June policy measures. 

Capital Inflows Strengthen External Position

In an interview with Businessline, Malhotra said the inflows have strengthened India's external position amid global geopolitical uncertainties and volatile capital flows.

Rejecting concerns that the inflows merely represent a recycling of existing deposits, the Governor said the RBI has adequate mechanisms to manage liquidity and minimise associated risks. 

He noted that excess foreign currency received through FCNR(B) deposits is invested in foreign assets, ensuring effective risk management.

RBI Sees Stronger Balance of Payments, Stable Rupee Outlook

Malhotra said the measures come amid challenging global conditions for emerging markets and are expected to strengthen India's balance of payments and currency stability. 

He attributed the rupee's recent depreciation to geopolitical tensions, a stronger US dollar and broader emerging market volatility, rather than weak economic fundamentals. 

Reiterating that the RBI does not target a specific exchange rate, he said it intervenes only to curb excessive volatility and maintains that the rupee is not overvalued and may even be undervalued.

Healthy External Sector Backed by Strong Fundamentals

The Governor cited the current account surplus during April-May, robust services exports, resilient remittance inflows, improving merchandise exports and stronger foreign direct investment flows as indicators of a healthy external sector.

On foreign exchange reserve management, Malhotra said the RBI continues to prioritise safety, liquidity and returns while reviewing reserve deployment periodically.

Monetary Policy to Remain Data-Driven

Discussing monetary policy, he reiterated that maintaining price stability remains the central bank's primary objective, while continuing to support economic growth wherever possible.

He said the Monetary Policy Committee (MPC) will remain data-dependent and retain flexibility under its neutral policy stance to respond to evolving domestic growth and inflation conditions.

Governor Dismisses Concerns Over Credit Growth

Malhotra dismissed concerns that strong credit growth could overheat the economy, saying banks remain well-capitalised with adequate liquidity and stable funding. 

He added that the RBI's supervisory framework is robust and that rising foreign interest in Indian banks and NBFCs reflects confidence in the country's financial system and long-term growth prospects. 

(KNN Bureau)