India’s external financing outlook could strengthen significantly following the Reserve Bank of India’s latest policy measures, with a report estimating potential capital inflows of $60-70 billion over the coming months. The measures are expected to reduce pressure on the rupee, lower foreign exchange volatility, and improve overall financing conditions in FY27.
According to the report, the RBI’s package announced alongside the June monetary policy review includes special swap windows for FCNR(B) deposits and External Commercial Borrowings (ECBs). These initiatives could attract $25-30 billion through FCNR(B) deposits and another $15-20 billion through ECBs raised by public sector undertakings. Additional inflows are also expected through government securities under the Fully Accessible Route (FAR).
The FCNR(B) swap facility, available for deposits mobilised until September 30, allows banks to swap foreign currency deposits with the RBI at par, effectively removing hedging costs. Deposits can be swapped until October 16 and carry a 1-year lock-in period, reducing the risk of sudden outflows.
Meanwhile, the ECB swap facility for public sector undertakings will remain available until January 15, 2027. It offers swaps at a fixed rate of 1.5% per annum, around 1.3 percentage points lower than current market rates, making foreign currency borrowing more attractive.
India typically requires around $7-8 billion in monthly capital inflows to balance its external accounts. The new measures are expected to help bridge this requirement through FCNR(B) deposits, ECBs, and portfolio investments.
Recent reforms for foreign investors, including higher investment limits and the removal of certain restrictions, are also expected to support fresh investments in Indian equities and debt markets. Enhanced tax benefits and changes to the FAR framework could further improve the appeal of Indian government bonds.
The report projects that while the rupee may continue to depreciate gradually, the risk of sharp currency weakness is expected to decline. Foreign exchange reserves currently stand at around $682 billion, and the RBI is expected to continue rebuilding reserves as capital inflows increase.
Reflecting the improved outlook, the report has revised India’s FY27 balance-of-payments forecast from a projected deficit of $50 billion to a surplus of $20 billion, supported by a capital-account surplus of $105 billion and a current-account deficit of $85 billion.
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