RBI measures may bring $50 billion inflows, bond inclusion could add more
The Reserve Bank of India’s latest policy measures aimed at attracting foreign capital could potentially bring nearly $50 billion in inflows, while further gains may come if India secures greater participation in global bond indices, a report has said.
According to ICICI Bank Global Markets, measures announced by the central bank, including support for foreign currency deposits, concessional foreign exchange swap facilities for certain external borrowings and broader access for overseas investors, could attract around $50 billion in inflows.
While keeping the repo rate unchanged at 5.25 per cent, the central bank announced a series of measures designed to encourage foreign currency inflows, improve liquidity conditions and support financial markets amid rising global uncertainties.
The Monetary Policy Committee (MPC) -- led by RBI Governor Sanjay Malhotra -- decided to maintain rates and retain a neutral stance, citing geopolitical tensions, elevated energy prices and uncertainties surrounding global growth and inflation.
Analysts at ICICI Bank Global Markets believe stronger capital inflows could help support the rupee, ease funding pressures within the banking system and improve overall liquidity conditions.
Another key policy announcement was the expansion of the Fully Accessible Route (FAR), which gives foreign investors wider access to government securities.
Combined with recent tax incentives on bond investments, analysts believe the move could strengthen India’s prospects for deeper integration with global debt markets and potentially generate additional inflows if broader bond index participation materialises.
Financial markets reacted positively to the announcements, with the rupee recovering from recent weakness while bond markets adjusted to expectations of increased foreign participation.
Despite optimism around capital inflows, analysts cautioned that inflation remains a significant risk, with elevated crude prices and geopolitical uncertainties continuing to cloud the economic outlook.
