RBI’s latest policy steps to lure foreign capital
On 5 June 2026, the RBI announced that the repo rate will remain unchanged at 5.25% for the second consecutive meeting. Alongside, a package of measures was unveiled to make Indian government securities more attractive to overseas investors.
Key developments
- Under the FAR, the RBI will now treat all new 15‑, 30‑ and 40‑year G‑secs as “specified securities”, expanding the investment universe.
- Limits on short‑term investment, concentration and individual security holdings for FPIs under the General Route are removed.
- Investment limits for NRIs and OCIs in equity instruments without SEBI registration are increased.
- The same relaxed limits are extended to all PROIs.
- A concessional forex swap facility will be available till 30 September 2026 to encourage external commercial borrowings (ECBs) by public sector undertakings.
- AD banks can raise fresh 3‑5‑year FCNR (B) deposits with the RBI covering the full hedging cost, also till 30 September 2026.
- The time allowed for realisation of export proceeds is proposed to be reduced from 15 months to nine months, easing cash‑flow for exporters.
Important facts
- Repo rate unchanged at 5.25% – signals a steady monetary stance.
- Tax benefits announced by the government on the same day complement the RBI measures.
- All changes aim to improve the balance of payments and attract stable foreign capital.
UPSC relevance
The announcements touch upon several GS‑3 topics: monetary policy, external sector management, capital market reforms, and foreign exchange regulation. Understanding the RBI’s tools—repo rate, forex swaps, and securities‑market access—helps answer questions on India’s macro‑economic framework, capital account convertibility, and strategies to manage external vulnerabilities.
Way forward
While the RBI stresses that the exchange‑rate policy remains market‑driven, it also signals readiness to intervene against excessive volatility. Aspirants should monitor how these measures affect foreign inflows, the rupee’s stability, and the overall fiscal position of the government. Future policy rounds may adjust the repo rate if inflation trends shift, or further liberalise capital‑account norms.