RBI’s Capital Inflow Measures May Bring USD 65 Billion, Strengthen Rupee to 92: SBI

A recent report by the State Bank of India (SBI) suggests that the Reserve Bank of India’s (RBI) foreign capital enhancement measures introduced in February and June 2026 could significantly strengthen India's external sector by attracting substantial overseas inflows, supporting the rupee, and improving the country's balance of payments position in FY2026-27.

According to the report, the RBI’s initiatives are expected to bring in USD 55–65 billion in foreign capital, helping the Indian rupee appreciate to nearly ₹92 per US dollar. The measures are designed not only to attract long-term foreign funds but also to deepen domestic financial markets and improve access to external financing.

SBI noted that the policy actions taken in February and June serve complementary objectives. While the February reforms relating to External Commercial Borrowings (ECBs) focused on structural improvements and market development, the June package was primarily aimed at encouraging foreign currency inflows and supporting the domestic currency without increasing local interest rates.

One of the key drivers of the anticipated inflows is expected to be Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. The report estimates that these deposits alone could contribute around USD 40–45 billion. Indian banks are currently able to offer FCNR(B) deposit rates ranging between 5.5% and 6%, making them attractive when compared with the prevailing three-year US Treasury yields of approximately 4.2%.

However, SBI highlighted that the scope for leveraging FCNR(B) deposits, as seen during the 2013 mobilisation exercise, is more limited today. The interest rate advantage over US markets has narrowed considerably, with the spread currently standing at about 2.1% for three-year deposits and 2.2% for five-year deposits, reducing the potential for aggressive leveraged fund mobilisation.

In addition to FCNR(B) deposits, the RBI’s newly introduced ECB/OFCB swap facility is projected to attract another USD 15–20 billion. The facility is expected to encourage fresh foreign currency borrowings and improve dollar liquidity within the domestic financial system.

The cumulative impact of these measures could significantly strengthen banking sector liquidity. SBI expects deposit growth to rise to 14.5–15% in FY27, while credit growth is likely to remain around 16%. This could lead to a notable reduction in the credit-deposit mismatch that has been a concern for the banking industry.

From an external sector perspective, the report forecasts a major turnaround in India’s Balance of Payments (BoP). Instead of the previously estimated USD 65–70 billion deficit, India could record a BoP surplus of USD 5–10 billion in FY27 if the anticipated inflows materialize.

A stronger inflow environment would also help the RBI build up its foreign exchange reserves, providing greater flexibility to manage volatility in currency markets and strengthen investor confidence.

While optimistic about the outlook, SBI emphasized that the RBI should continue to actively manage currency stability. The report noted that excessive depreciation of the rupee could create broader economic risks, and maintaining currency stability remains more beneficial than allowing significant weakening of the domestic currency under current global conditions.

Short Summary

SBI estimates that the RBI’s foreign capital measures announced in February and June 2026 could attract USD 55–65 billion in inflows through FCNR(B) deposits and ECB/OFCB swap facilities. The inflows may strengthen the rupee, improve banking liquidity, and help India achieve a Balance of Payments surplus in FY27.