New Delhi: RBIs latest monetary measures, assumed as coordinated attempts hope to shift market perception of rupee from depreciating currency towards stronger capital inflows. Stemming from the major announcement made by RBI governor Sanjay Malhotra, experts estimate the move can trigger rupee inflows.
One analyst predicts at least $40 billion in inflows, potentially supporting the rupee towards the 92–93 levels while another expects potential inflow impact higher at $50-75 billion. They expect the MPC to remain on hold in August thereby, maintaining the repo rate unchanged at 5.25 % with a neutral stance.
The RBI on Friday announced a raft of measures to attract foreign inflows into India like a subsidized window for NRI deposits (where RBI will bear the full hedging cost for fresh 3–5-year deposits raised by banks until September 2026), and a cheaper forex swap to encourage PSUs to raise ECBs. To support FII investment in government bonds, authorities cut the 12.5 per cent long-term capital gains tax and the 20 per cent withholding tax on interest income.
Economists expect the central bank to hike rates later in the year. “We expect RBI to possibly start with the tightening cycle post Oct ’26, since by then, there will be more clarity even on the distribution of rainfall. Thereby, we expect one-two rate hikes in FY27, they said.”
Meanwhile, the Monetary watchdog has also proposed to introduce polymer or plastic notes. Governor Sanjay Malhotra said that the proposal remains under consideration and is still at preliminary stages.
The Rupee has been the worst performing Asian currency and has depreciated by more than 6% so far this year, making it the second worst-performing Asian currency, just next to its Asian counterpart, the Indian Rupiah.
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