RBI and Government Announce Measures to Boost Foreign Investment in Bonds and Equities

Livemint - Economy · 15 Jun 2026 · 2 min read
Prelims · Economy Mains · GS3 Economy High relevance

The RBI and government introduced measures to attract foreign capital into Indian debt and equity markets, including tax exemptions on sovereign bonds and relaxed FPI restrictions, aiming to stabilize the rupee and improve balance of payments.

Key points

Fully Accessible Route (FAR): The RBI expanded FAR eligibility to include all new issuances of 15-year, 30-year, and 40-year government securities, along with sovereign green bonds, allowing unrestricted foreign investment.

Tax Exemptions: FPIs will be exempt from income tax on interest and capital gains from G-Sec investments starting 1 April 2026, potentially increasing returns by 15-20% and enhancing India's appeal to global bond indices.

FPI Investment Limits: The RBI removed sub-limits on short-term investment, concentration, and individual securities under the general route, merging 'general' and 'long-term' categories into a single limit of 6% for central and 2% for state securities.

Equity Investment Reforms: PROIs (Persons Resident Outside India) can now invest in listed Indian equities via PIS, with individual limits raised to 10% of paid-up capital (from 5%) and aggregate limits to 24% (from 10%).

Forex Measures: RBI introduced a concessional forex swap facility for PSUs raising ECBs and full hedging cost coverage for FCNR(B) deposits till 30 September 2026, aiming to encourage dollar inflows.

Export Proceeds: RBI reduced the realization period for export proceeds to nine months from 15 months, ensuring quicker repatriation of foreign currency earnings to India.

[GS3-Economy] These measures aim to address the $40-50 billion balance of payments gap projected for FY27, leveraging foreign capital to stabilize the rupee and bolster forex reserves.

Way Forward: India should further streamline FPI regulations, enhance transparency in bond markets, and explore inclusion in additional global indices to sustain long-term foreign investment inflows.

Key terms

Fully Accessible Route (FAR)

A framework by RBI allowing foreign investors unrestricted access to designated government securities without quantitative limits. It enhances India's debt market accessibility, crucial for global index inclusion and attracting stable foreign capital.

Foreign Portfolio Investors (FPIs)

Entities registered to invest in Indian financial markets, including equities and bonds. FPIs play a critical role in capital flows, exchange rate stability, and liquidity, making their regulation pivotal for economic policy.

Portfolio Investment Scheme (PIS)

A mechanism enabling NRIs, OCIs, and now PROIs to invest in Indian equities. Expanding PIS access broadens the investor base, diversifying sources of foreign capital and reducing reliance on volatile institutional flows.

Balance of Payments (BoP)

A record of all economic transactions between India and the rest of the world. Measures targeting foreign inflows aim to reduce BoP deficits, stabilize the rupee, and ensure external sector resilience.