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Informist, Friday, Jun. 5, 2026

 

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--RBI Malhotra: No proposal to discontinue FX net open position cap for banks 
--RBI Malhotra: Intervene when FX mkt speculation excessive, move disorderly 
--RBI Malhotra: Prepared to maintain orderly movement in rupee 
--RBI Malhotra: Have sufficient FX reserves 
--RBI Malhotra: We don't expect pressure on FX but we are always prepared 
--RBI Gupta: Expect BoP to be healthy after several FX inflow measures 
--RBI Malhotra: Expect banks to offer better rates on FX deposits 
--RBI Malhotra: Gave ECB FX window to PSU banks as benefits can be widespread 
--RBI Malhotra: Will take measures to curb speculation if required in FX mkt 
--RBI Malhotra: Not considering moves to restrict capital outflows 
--RBI Malhotra: Will continue to provide adequate liquidity as needed 
--RBI Malhotra: Expect banks to pass on some hedging cost benefits to clients 
--RBI Malhotra: No target for NRI deposits, hope we will get large flows 
--RBI Malhotra: Did not say rupee is undervalued, but by some account it is 
--RBI Malhotra: Did not say rupee is undervalued 
--RBI Malhotra: No target in mind for inflows from FX measures 
--RBI Malhotra: Confident of a much better BoP this year 
--RBI Malhotra: Expect reasonable inflows from all FX measures 
--RBI Malhotra: Hopeful of reasonable inflows from all FX moves 
 

 

 

 

NEW DELHI – The Reserve Bank of India is not targeting any particular quantum of inflows from the several foreign capital measures announced Friday, but expects it to be healthy and reasonable, Governor Sanjay Malhotra said. All these measures will result in a healthy and much better balance of payments this year, he added. 

 

"We are not targeting any particular amount, but we are hopeful of reasonable flows the various measures announced today," he said at the post-policy press conference. "As a result of all these measures, we expect healthy flows, not only in this short period we have given for ECBs (External Commercial Borrowings) and FCNR (Foreign Currency Non-Resident) B deposits, but there have been measures for equity as well as government bonds. These are measures that have been taken earlier," he added.  

 

The RBI Friday announced a slew of measures to garner capital inflows into India, in line with market expectations. The measures come at a time when the Indian rupee has fallen over 5% against the dollar in 2026 so far, due to higher crude oil prices and sustained foreign outflows.

 

Among the various measures, Malhotra Friday announced a facility of concessional foreign exchange swap till Sept. 30 to incentivise external commercial borrowings by public sector units. He also introduced a similar facility for bearing the full hedging cost to banks for raising fresh three-five year foreign currency non-resident deposits till Sept. 30. 

 

The central bank also expanded the universe of 'specified securities' for government securities under the Fully Accessible Route, by including all new issuances of 15-, 30- and 40-year tenor bonds. Further, limits for investment by Non-Resident Indians and Overseas Citizenship of India in equity instruments traded on the stock market without Securities and Exchange Board of India registration were also increased. The same facility has also been extended to all individual Persons Resident Outside India. Along with this, the government earlier in the day also exempted foreign institutional investors from paying capital gains tax on investment in government bonds. 

 

 

According to Malhotra, the public sector units were incentivised to raise offshore capital as their benefits can be widespread. The benefits, he hoped, extend to clients as well in the form of better rates for deposits by non-residents in foreign currency. We expect banks to pass on the benefits from lower hedging costs to clients, he said, adding that the central bank was not targeting a particular level of NRI deposits due to the incentives. 

 

While the central bank took numerous measures to improve capital inflows, the governor dismissed speculations of any potential measures to restrict capital outflows. As such, the governor maintained that the central bank will intervene to curb speculation in the forex market, if needed. He reiterated that the RBI will intervene when the speculation is excessive and when the currency is moving disorderly. The RBI is prepared to maintain an orderly movement in the rupee, he said.  

 

Malhotra also said that currently, there is no proposal to discontinue the cap on onshore net open positions of banks. The RBI had in March rolled out regulatory measures to curb volatility in the exchange rate, including putting a cap of $100 million on onshore net open positions of banks. 

 

Despite the stress on the rupee, the central bank chief said that the latest reserves are "sufficient" and adequate to cover 11 months of imports and over 89% of external debt. Going forward, he said that the RBI does not expect pressure on reserves, "but are always prepared" to take action if needed. India's total reserves were $681.4 billion as of May 29, much lower than the record $728.5 billion held just before the war broke out on Feb. 28. 

 

The governor also said that the rupee was not entirely undervalued, although by some accounts, it is. He said this in the context of his earlier comment, where he mentioned that it is "reasonable" to think that the rupee is not overvalued. "If anything, one could argue that the rupee has become undervalued, both in nominal as well as in Reer (real effective exchange rate) terms," he had said in an interview last month. The rupee's real effective exchange rate, based on a basket of 40 currencies in terms of trade-based weights, fell for the fifth consecutive month in April to a near 13-year low. The real effective exchange rate index was 90.96 in April, down from 92.57 in March.  End

 

US$1 = INR 94.95

 

Reported by Priyasmita Dutta and Pratiksha

Edited by Akul Nishant Akhoury

 

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