An SBI report predicts RBI's measures will attract USD 55-65 billion in foreign capital. This could strengthen the rupee to 92 against the US dollar, improve liquidity, and turn India's balance of payments to a surplus in FY27.
The Reserve Bank of India's recent measures to attract foreign capital could bring in USD 55-65 billion of inflows, strengthen the rupee to around 92 against the US dollar and help India's balance of payments (BoP) turn surplus in FY27, according to a report by State Bank of India.
Coordinated Effort for Stability
The report said the RBI's February and June 2026 measures should be viewed as a coordinated effort to stabilise the rupee, deepen the domestic debt market, attract stable foreign capital and ease external funding conditions. It stated, "The February measures on ECB were structural and market development oriented, while the June measures aimed to attract foreign currency inflows and support rupee without raising domestic interest rates".
Projected Inflow Channels
FCNR(B) Deposits and ECB Swaps
According to the report, the central bank's latest initiatives are expected to generate significant foreign currency inflows through FCNR(B) deposits and the ECB/OFCB swap window. The report estimates that FCNR(B) deposits could attract around USD 40-45 billion.
It noted that banks can currently offer attractive FCNR(B) deposit rates in the range of 5.5-6 per cent, compared with US three-year yields of around 4.20 per cent. The report said that while the leverage route used during the 2013 FCNR(B) mobilisation remains available, the interest rate differential between India and the US has narrowed significantly. The gap for three-year deposits has reduced to 2.1 per cent and for five-year deposits to 2.2 per cent, limiting the scope for aggressive leverage-based mobilisation.
In addition, the ECB/OFCB swap window is expected to bring another USD 15-20 billion of inflows by encouraging fresh foreign currency borrowings and improving dollar supply in the domestic market.
Impact on Banking and External Sector
According to the report, the combined inflows of USD 55-65 billion could significantly improve liquidity conditions in the banking system. It expects deposit growth in FY27 to rise to 14.5-15 per cent against potential credit growth of 16 per cent. As a result, the credit-deposit gap could narrow sharply after adjusting for regulatory measures.
The report also projected a substantial improvement in India's external sector position. It expects the overall balance of payments to record a surplus of USD 5-10 billion in FY27, compared with its earlier estimate of a USD 65-70 billion deficit. The report added that stronger inflows would increase the RBI's foreign exchange reserves and provide greater capacity to manage volatility in the currency market. It also cautioned that the central bank should continue to prevent excessive rupee depreciation, arguing that the risks associated with sustained currency weakness outweigh the benefits of additional flexibility at the current juncture.
According to the report, the expected inflows could strengthen macroeconomic stability, support the rupee and improve funding conditions across the banking system during FY27.
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