Sitharaman Unveils New Measures to Boost Foreign Capital Inflows

Nirmala Sitharaman signals more policy measures to boost foreign capital inflows into India

New Delhi, June 15

At a fireside chat, with Hero Enterprise Chairman Sunil Kant Munjal and Motilal Oswal Financial Services Ltd Chairman and Co-founder Raamdeo Agrawal at the MindMine Summit 2026, Sitharaman said policymakers are adopting a calibrated approach to ensure adequate capital inflows into the country.

Responding to concerns raised by Agrawal regarding the growing size of foreign institutional investor (FII) holdings relative to India's foreign exchange reserves, the Union Minister said India needs greater foreign capital participation and has already initiated measures in that direction.

"Our own growth, our own participation in the market has really buoyed the stock market considerably," Sitharaman said.

Highlighting recent policy interventions, she said, "Between the RBI and the government, we've done some analysis and come up with an announcement last week where the bond markets can be a very good magnet to absorb those capital which can come in, making it into FAR so that the compliance routines are not going to burden people."

The Finance Minister added that tax-related incentives have also been introduced to improve investor sentiment.

"And the withholding tax treatment which we've offered, we think will be the first step towards drawing some capital back, although we've at the moment confined it only to the bond market," she said.

Signalling further policy action, Sitharaman said, "Certainly, that's not the end of the story. We'll be doing more. We recognize we need more foreign capital to come in."

She also pointed to measures taken by the RBI to facilitate overseas fundraising by public sector entities and banks.

"The fact that the RBI has now allowed public sector undertaking and banks to go out and pick money from outside, giving them a framework in which they can do it," Sitharaman said.

Explaining the framework, she noted that currency-related risks would be partly addressed through RBI support.

"In that framework, a very important aspect is the hedging is at the RBI's expense. They don't have to hedge for the risks, particularly the currency-related risk, the volatility, the exchange rate risk. That will be on RBI," she said.

"As a result, the banks can now go unfettered to raise capital from outside. So we have taken a very calibrated approach to make sure that the markets do receive the required investments," the Finance Minister added.

During the discussion, Sitharaman also outlined the broader economic challenges facing India amid global uncertainties, including volatility in crude oil prices, rising insurance costs linked to geopolitical tensions, supply chain disruptions and weather-related risks.

"India's challenge is very similar. But of course, India's comfort is that you have a large domestic market, which is good enough with the consumption going up," she said.

The Finance Minister noted that despite external pressures, India remains supported by strong domestic demand, while the government continues to remain prepared for emerging global economic challenges.

— ANI