RBI offers concessional forex swap till Sept 30 to incentivise overseas borrowings by PSUs; Eases investment limits to attract foreign capital
New Delhi, June 5
The Reserve Bank of India on Friday unveiled a series of targeted regulatory changes designed to attract foreign capital and ease investment bottlenecks, expanding the scope of government securities available to international investors and easing limits for overseas individuals.
Delivering the Monetary Policy Statement, RBI Governor Sanjay Malhotra introduced temporary financial mechanisms to encourage overseas borrowing by public sector firms and boost foreign currency deposits through commercial banks.
"A facility of concessional forex swap will be provided till 30th September 2026 to incentivize ECBs by PSUs," Malhotra said.
External Commercial Borrowings (ECBs) are commercial loans raised by eligible Indian entities from recognized non-resident lenders, either in foreign currencies or Indian Rupees. They are used by corporations and Public Sector Undertakings (PSUs) to access global capital for expansion, infrastructure, and refinancing.
"A similar facility for bearing the full hedging cost shall be provided till 30th September 2026 to AD banks for raising fresh 3-5-year FCNR (B) deposits," the Governor added, while also noting that it is proposed to restore the time for realisation of export proceeds to nine months.
Malhotra explained that these domestic interventions are designed to buffer the country's external finances against broader global economic pressures, such as tariff disputes and fluctuating commodity prices.
To widen the pool of foreign investment, the central bank also expanded the eligibility criteria for sovereign debt and dismantled several long-standing investment caps.
"To attract foreign capital, I also have a few measures to announce today," Governor Sanjay Malhotra said. "For government securities under the Fully Accessible Route (FAR), we are expanding the universe of 'specified securities' by including all new issuances of 15-, 30- and 40-year tenor G-secs."
The central bank chief added that additional structural restrictions on Foreign Portfolio Investors (FPIs) are being discarded to complement recent fiscal policy changes.
"In addition, limits pertaining to short-term investment, concentration and individual securities on FPI investment under the General Route are being removed," Malhotra said. "These measures along with the tax benefits provided by the government this morning should help attract foreign capital for government borrowing."
Beyond the debt market, the RBI eased access to Indian equities for individual investors living abroad, aligning their investment limits with those of non-resident citizens.
"The limits for investment by NRIs and OCIs in equity instruments traded on the stock market without SEBI registration are being increased," the Governor stated. "Further, the same facility is being extended to all individual Persons Resident Outside India (PROIs) at par with NRIs and OCIs."
Malhotra noted that while these measures are expected to strengthen the country's balance of payments, "we will continue to make the right policy adjustments to further promote exports and attract and incentivise capital inflows."
— ANI
Reader Comments
Interesting approach - offering concessional forex swaps to encourage ECBs while also easing FPI limits. The timing makes sense given global trade tensions. But I'm curious about the 9-month realisation period for export proceeds being restored. Wasn't it extended earlier to help exporters during the pandemic? 🤔
Honestly, these measures feel like a mixed bag. On one hand, expanding FAR to include 15-40 year G-secs is great for deepening the bond market. But why only till Sept 2026 for the forex swap facility? That's too short a window for PSUs to plan large infrastructure projects. Bharosa nahi hai ki itne time mein kuch concrete hoga. 🤷♂️
This is actually quite comprehensive - covering ECBs, FCNR deposits, G-sec access, and even easing equity investment limits for NRIs/OCIs. The full hedging cost coverage for FCNR(B) deposits is particularly smart - it reduces bank's forex risk. But will these individual measures be enough to offset capital outflows from emerging markets? Only time will tell.
Finally some clarity on FPI limits! The removal of short-term investment and concentration limits was long overdue. But I'm slightly concerned about opening up too much too fast - we saw in 2013 how volatile FPI flows can be. Hope the RBI has enough forex reserves to manage any sudden reversals. Btw, great to see PROIs being treated at par with NRIs for equity investments! 🇮🇳
The expansion of FAR to include
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