RBI MPC June 2026: India Offers Tax-Free G-Secs To Foreign Investors Amid Oil, Rupee And War Risks

Seeking to boost global participation in Indian financial markets, the RBI announced a set of reforms spanning government bonds, equity investments, foreign currency deposits and export financing.

The measures are aimed at widening funding avenues and improving the flow of global capital into the economy.

Source : ABPLIVE AI

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Key points generated by AI, verified by newsroom

• RBI widened government securities access for foreign investors.
• Forex swap incentives, FCNR(B) deposits attract overseas capital.
• Increased NRI/OCI equity limits, extended export proceeds timeline.

RBI MPC June 5, 2026: The Reserve Bank of India (RBI) on Friday announced a series of measures aimed at attracting foreign capital, widening overseas participation in domestic financial markets and strengthening external sector stability amid a challenging global environment.

The announcements, made by RBI Governor Sanjay Malhotra alongside the June monetary policy decision, come as policymakers seek to shore up capital inflows at a time of elevated crude oil prices, a widening current account deficit risk and continued uncertainty stemming from the conflict in West Asia.

The measures span government securities, foreign portfolio investments (FPIs), overseas borrowing, foreign currency deposits and export proceeds.

More Government Bonds Opened To Foreign Investors

In a significant move, the RBI said it is expanding the universe of government securities available under the Fully Accessible Route (FAR) by including all new issuances of 15-year, 30-year and 40-year government securities (G-Secs).

The Fully Accessible Route allows non-resident investors to invest in specified government securities without being subject to investment caps.

The move is expected to make India's sovereign debt market more attractive to long-term investors such as pension funds, sovereign wealth funds and insurance companies seeking stable returns.

RBI Removes Key FPI Restrictions

The central bank also announced the removal of several restrictions applicable to foreign portfolio investors investing in government securities under the General Route.

Limits relating to short-term investments, investment concentration and individual security exposure are being withdrawn, giving foreign investors greater flexibility in allocating capital across the government bond market.

According to the RBI, these changes, coupled with recent tax incentives announced by the Centre, are expected to support foreign participation in government borrowing programmes.

Tax Relief For Foreign Investors

The government's decision to remove taxes on foreign investors purchasing specified government securities is expected to further improve the attractiveness of Indian debt instruments.

The tax benefits are aimed at enhancing post-tax returns for overseas investors and strengthening India's competitiveness against other emerging market debt destinations.

Analysts believe the move could help deepen the domestic bond market while expanding the pool of investors participating in government borrowing.

NRI And OCI Investment Limits Increased

The RBI also announced higher investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) investing in equity instruments traded on Indian stock exchanges without requiring SEBI registration.

In a broader liberalisation measure, the same facility is now being extended to all individual Persons Resident Outside India (PROIs), placing them on par with NRIs and OCIs.

The move is expected to widen the overseas investor base and facilitate greater participation by individual investors in Indian capital markets.

Forex Swap Facility To Encourage Overseas Borrowing

To support foreign currency funding, the RBI announced a concessional forex swap facility for External Commercial Borrowings (ECBs) raised by public sector undertakings (PSUs).

The facility will remain available until September 30, 2026, and is intended to incentivise overseas borrowing by reducing associated foreign exchange costs.

The measure could help PSUs access international capital at competitive rates while diversifying funding sources.

Support For Fresh FCNR(B) Deposits

The central bank also introduced a temporary facility for authorised dealer (AD) banks raising fresh Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits with maturities between three and five years.

Under the scheme, the RBI will bear the full hedging cost, helping banks mobilise foreign currency deposits at a lower cost.

The facility will remain in place until September 30, 2026 and is expected to encourage inflows from the Indian diaspora and other overseas depositors.

Exporters Get More Time To Bring Money Home

In another measure aimed at supporting external sector stability, the RBI said it will restore the timeline for realisation of export proceeds to nine months.

The move provides exporters with additional flexibility in managing international receivables and aligns the framework more closely with normal trade conditions.

Why The Measures Matter

The announcements come as India navigates a complex global environment marked by volatile energy prices, geopolitical tensions and shifting capital flows.

Higher crude oil prices have increased concerns around the country's import bill and current account deficit, making stable foreign capital inflows increasingly important.

By broadening access to government securities, easing investment restrictions, offering tax benefits and incentivising foreign currency inflows, the RBI and the government are seeking to strengthen India's external financing position while maintaining confidence in domestic financial markets.

The package represents one of the most comprehensive sets of capital-flow measures announced by the central bank in recent years and signals a coordinated effort to attract long-term overseas funds at a time of heightened global uncertainty.