RBI, Govt Measures May Bring USD 35–40 Bn Inflows To Bridge BoP Gap: Yes Bank

New Delhi, Jun 8 (KNN) A package of measures announced by the Reserve Bank of India (RBI) and the central government to attract foreign capital could bring in approximately USD 35–40 billion in inflows, enough to bridge India's anticipated balance of payments (BoP) gap in FY2026–27, according to a report by Yes Bank.

The report said the measures aim to attract foreign capital as India seeks to ease pressure on the rupee and stabilise its external position. Higher inflows would also bolster the RBI’s forex reserves, giving the central bank more room to manage depreciation, ANI reported.

FCNR Deposits: The Largest Expected Source

The report identifies Foreign Currency Non-Resident — Bank, or FCNR(B) — deposits as the primary vehicle for attracting fresh inflows. 

The RBI has exempted these deposits from Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR) requirements, and has agreed to bear hedging costs on three-to-five year FCNR(B) deposits raised by authorised dealer banks. Combined with leveraging facilities, Yes Bank estimates these incentives alone could attract the bulk of the projected USD 35–40 billion.

External Commercial Borrowing (ECB) inflows are also expected to rise following the latest measures, though Yes Bank projects more modest fresh inflows of around USD 4–5 billion from this channel.

Government Securities Opened Up Further

To deepen foreign participation in India's sovereign debt market, the government and the RBI on Friday announced a series of regulatory and tax changes. 

The long-term capital gains tax on government securities for foreign investors has been reduced to nil from 12.5 per cent, and the 20 per cent withholding tax has been removed entirely.

Under the Fully Accessible Route (FAR), foreign portfolio investors (FPIs) will now be permitted to invest in government securities with maturities of 15, 30, and 40 years. 

Restrictions on short-term investments, concentration limits, and security-wise limits under the General Route for FPI investments in government securities have also been lifted.

Broader Access for NRIs and Overseas Investors

The government has additionally raised the limits on investments by Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), and Persons Resident Outside India (PROIs) in equity instruments without requiring SEBI registration, further widening the channels through which overseas Indian capital can enter domestic markets.

Yes Bank's report concludes that, taken together, these measures should make Indian government securities meaningfully more attractive to foreign investors and support a sustained increase in capital inflows over the course of FY27.

(KNN Bureau)