India has announced a series of measures aimed at attracting higher dollar inflows as the rupee remains under pressure from rising crude oil prices and significant outflows from domestic equity markets.
The steps, unveiled by the Reserve Bank of India (RBI), are designed to encourage foreign investment, support government borrowing programmes, and improve access to overseas capital.
Government bonds are included under the fully accessible route
Among the key measures, all new issuances of 15-year, 30-year, and 40-year government bonds will be included under the Fully Accessible Route.
According to the RBI, bonds falling under this category are already part of three global bond indexes.
The move is expected to improve accessibility for foreign investors and potentially increase participation in India’s government debt market.
In another significant change, the central bank said that limits related to short-term investments, concentration norms, and individual securities applicable to foreign investment under the general route will be removed.
RBI Governor Sanjay Malhotra said the latest measures, combined with tax benefits announced by the government earlier in the day, are expected to support foreign participation in government borrowing programmes.
Relaxation for overseas investors
The RBI also announced changes aimed at broadening participation by overseas investors in Indian markets.
Limits for investments by Non-Resident Indians and Overseas Citizens of India in equity instruments traded on stock exchanges without registration with the Securities and Exchange Board of India are being increased.
The facility is also being extended to all individual Persons Resident Outside India on par with NRIs and OCIs, widening the pool of potential foreign investors eligible to participate under the framework.
Forex swap facilities introduced
To further support foreign currency inflows, the RBI said it will provide a concessional foreign exchange swap facility for external commercial borrowings raised by state-run companies.
The facility will remain available for approximately four months, until September 30.
Additionally, the central bank will provide a similar facility for banks raising Foreign Currency Non-Resident , or FCNR(B), deposits with maturities ranging from three to five years.
Under this arrangement, the RBI will bear the full hedging cost until September 30, a move aimed at encouraging banks to mobilise foreign currency deposits.
The central bank also announced that it will restore the time period for the realisation of export proceeds to nine months.
Strong US economic data supports dollar
The RBI’s measures come at a time when the US dollar has strengthened against major global currencies.
The greenback received support from stronger-than-expected economic data and continued uncertainty surrounding negotiations between the United States and Iran.
Market participants are now focusing on upcoming labour market indicators, including weekly jobless claims data and the May Nonfarm Payrolls report.
Data released on Wednesday showed that private-sector employment increased by 122,000 jobs in May.
The figure exceeded market expectations of 117,000 and followed a revised increase of 105,000 in April.
Additional support came from the services sector.
The Institute for Supply Management’s Services Purchasing Managers’ Index rose to 54.5 in May from 53.6 in April, indicating that business activity continued to expand and at a faster pace than the previous month.
Following the release of the data, the US Dollar Index climbed above the 99.50 level, reaching its highest point since early April.
The index later consolidated around those levels during early European trading on Thursday.
Meanwhile, sentiment in equity markets remained cautious.
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