Policy Initiatives Over Recent Months Expected to Further Strengthen Our Balance of Payments: RBI Guv

Mumbai, June 5: RBI Governor Sanjay Malhotra laid out an ambitious package of measures aimed at reinforcing India’s external sector. The announcement addressed fiscal deficit concerns directly, signalling that the central bank views a robust balance of payments as essential insulation against global volatility. 

Speaking after the conclusion of the Monetary Policy Committee meeting on Friday, Governor Malhotra opened his remarks on the external sector with a broad survey of policy actions already in train. He cited recent trade agreements with major trading partners, several of which have already come into force, as a foundation for improving current account dynamics. The opening of the insurance sector to 100 per cent foreign direct investment, the accelerating ethanol blending programme as a vehicle for energy transition, the easing of FDI restrictions for land-bordering countries, and the liberalisation of the external commercial borrowings framework were all enumerated as building blocks of a more resilient balance of payments. “Various policy initiatives over the recent months are expected to further strengthen and support our balance of payments,” the Governor said. 

Five Measures to Attract Foreign Capital 

Beyond cataloguing existing initiatives, the Governor used the post-MPC statement to announce five concrete steps targeted at capital inflows. On government securities, he said the universe of specified papers under the Fully Accessible Route — the FAR channel open to non-resident investors without any limit — will be expanded to include all new issuances of 15-, 30- and 40-year tenor G-Secs. Previously only securities up to a 10-year tenor were eligible.  

Simultaneously, limits on short-term investment, concentration and individual security holdings that applied to FDI under the general route are being removed entirely, clearing a structural bottleneck that had constrained portfolio inflows into the debt market. These moves, combined with the tax benefits on government securities announced by the government earlier on Friday, are collectively designed to deepen the foreign appetite for Indian sovereign paper at a time when the fiscal deficit trajectory demands sustained external financing support. 

For equity markets, the Governor announced an increase in the limits for investment by Non-Resident Indians and Overseas Citizens of India in listed equity instruments, without the requirement of SEBI registration. More significantly, this facility is being extended to all individual persons resident outside India — not just NRIs and OCIs — on an equal footing, broadening the pool of potential foreign retail investors in Indian equities considerably. 

To incentivise external commercial borrowings by public sector undertakings, a concessional forex swap facility will be available for approximately four months, through September 2026. A parallel facility will cover the full hedging cost for authorised dealer banks that raise three- to five-year FCNR(B) deposits, also until September 30. Both measures are designed to reduce the effective cost of foreign currency borrowing and deposit mobilisation, encouraging PSUs and banks to tap overseas liquidity pools that might otherwise remain underutilised given hedging costs. 

The fifth measure restores the time limit for realisation of export proceeds to nine months, reversing a pandemic-era extension that had stretched the deadline to fifteen months. The Governor framed this as a signal of normalisation: with global trade conditions improved and India’s export sector recovering, the extended window is no longer necessary and its removal should accelerate the repatriation of foreign exchange, directly supporting the current account. 

Exchange Rate Policy: No Targets, No Tolerance for Disorder 

The Governor reiterated that India’s exchange rate policy remains unchanged: the RBI does not target any specific level or band and continues to allow the rupee to be determined by market forces. However, he issued a clear warning against speculative disruption. Excessive volatility — particularly the kind driven by speculative pressures in periods of heightened global uncertainty, of which recent weeks have provided fresh examples — will be actively curtailed. “While our objective is not to resist market-driven adjustments, we shall curb excessive volatility and prevent disorderly market movements,” he said. With India’s foreign exchange reserves providing a substantial buffer and a broad arsenal of regulatory and market-based instruments at its disposal, the RBI signalled it is fully prepared to act. “We shall remain vigilant and we are fully prepared,” the Governor concluded. 

RBI’s Five New Measures at a Glance 

Announced by Governor Sanjay Malhotra after the MPC meeting, June 5, 2026