More measures to attract foreign capital likely: Sitharaman

Finance Minister Nirmala Sitharaman on Monday said the measures announced by the RBI and Government to boost foreign fund inflows are the “first step” to bring back foreign capital and indicated that more steps could be in the offing.

Sitharaman also said that there is a need to be prepared for exigencies arising out of the evolving global situation as the Indian economy is facing “severe strain” from import of key raw materials, as well crude oil and fertilisers.

Speaking at the Mindmine Summit 2026, Sitharaman said an analysis by the RBI and the Government has shown that the bond market can be a “very good magnet” to absorb foreign capital.

Accordingly, to reduce compliance burden for foreign investors in Government Securities (G-Secs), the Government on June 5 expanded the list of specified securities under the Fully Accessible Route (FAR) to also include new issuances in G-Secs.

Besides, income tax exemption was given to income from interest and capital gains made by FPIs from investments in G-Secs.

Sitharaman said these measures are the “first step” towards drawing foreign capital back.

“Although at the moment it’s confined to the bond market, certainly that’s not the end of the story. There will be more. We recognise, we need more foreign capital to come in,” Sitharaman said.

The RBI on June 5 had allowed banks to access the RBI’s swap facility for Foreign Currency Non-Resident (Bank) (FCNR(B), deposits with maturities ranging from 3-5 years till September 30.

The facility would allow banks to swap US dollar deposits with the RBI, and manage currency risks. 

Further, to shore up foreign capital inflows, RBI has brought in a forex swap facility to encourage PSUs to raise external commercial borrowings (ECBs) until September 30.

Sitharaman said under the framework announced by the RBI, currency hedging will be at the expense of the central bank.

“And as a result, the banks can now go unfettered, to raise their own funds. So we have taken a very calibrated approach to make sure that the markets do see the required investments,” Sitharaman said.

Government sources had earlier said that more measures to increase FDI flows into the economy are in the offing, which will help bolster forex reserves and stabilise rupee value.

India’s foreign exchange reserves declined by $ 711 million to $ 681.610 billion in the week ended June 5.

Government sources had earlier said that in view of rising fertiliser prices globally, the fertiliser ministry has sought a 100 per cent increase in subsidy for the current fiscal. The budget has estimated a fertiliser subsidy of Rs 1.71 lakh crore for the current fiscal.

The closure of the Strait of Hormuz due to the crisis in West Asia will have an impact on the fertiliser import bill. Also, the narrowing of available pool of fertilisers in the global market is making the global tendering process complex.

This is leading to two major challenges in fertiliser import — the first one is securing supplies and the tendering process, while the other is the rate and speed of change in fertiliser prices. 

Also, the closure of Hormuz has spiked crude import bills. India imports about 87 per cent of its crude requirement, of which 46 per cent is transiting through or near the Strait of Hormuz.

Also, the country imports 60 per cent of its LPG usage and of that, 90 per cent flows through the Strait.