RBI and Government Announce Measures to Attract Foreign Capital into Bonds and Equities

On 5 June 2026, the Reserve Bank of India and the central government together announced a set of measures aimed at drawing more foreign money into India's debt and equity markets. The steps were taken against the backdrop of steady foreign portfolio outflows and pressure on the Indian rupee, made worse by global uncertainty linked to the West Asia conflict. The goal is to improve the inflow of foreign exchange and ease the strain on the currency.

On the bond side, the RBI widened the list of government securities available under the Fully Accessible Route (FAR), which lets foreign investors buy designated government bonds without any quantity limits. All new issues of 15-year, 30-year and 40-year government securities, along with sovereign green bonds, were added to this route. The central bank also removed certain sub-limits on short-term investment and on holdings in individual securities for foreign portfolio investors, while merging the existing 'general' and 'long-term' investment categories into a single category. The overall ceilings of 6% of outstanding central government securities and 2% of state government securities continue to apply.

The government supported these steps with tax relief. From 1 April 2026, foreign portfolio investors will be exempt from income tax on the interest income and capital gains they earn from government securities. A similar exemption was extended to the Bank for International Settlements. Analysts noted that this tax break could meaningfully raise the returns foreign investors earn on Indian government bonds, making the market more attractive and strengthening the case for India's inclusion in global bond indices.

Rules for foreign investment in equities were also relaxed. Individual Persons Resident Outside India (PROIs) will now be allowed to invest in listed Indian shares through the Portfolio Investment Scheme, a facility earlier open only to Non-Resident Indians and Overseas Citizens of India. The individual investment cap under the scheme was raised to 10% of a company's paid-up capital from 5%, and the combined limit for all such investors was increased to 24% from 10%. In addition, the RBI announced steps to lower hedging costs and encourage foreign-currency deposits and overseas fundraising.

For students, this development illustrates how the RBI and the finance ministry can act together to manage the balance of payments and stabilise the rupee. Terms such as Fully Accessible Route, Foreign Portfolio Investors, Portfolio Investment Scheme and sovereign green bonds are useful concepts for the economy sections of competitive exams.