RBI's measures aimed at stabilising rupee, boosting foreign inflows: SBI Research

The Reserve Bank of India's latest policy measures are designed to address exchange-rate volatility, strengthen external sector resilience and attract foreign capital, even as the central bank maintained a neutral monetary policy stance, according to a report by SBI Research's Ecowrap. 

The Monetary Policy Committee (MPC) on Friday unanimously decided to keep the repo rate unchanged at 5.25% while retaining the neutral stance. At the same time, the RBI lowered its FY27 GDP growth forecast by 30 basis points to 6.6% and raised its CPI inflation projection by 50 basis points to 5.1%. Core inflation estimates were also revised upward by 30 basis points to 4.7%. 

According to SBI Research, the language of the policy statement signals a stronger focus on inflation management and safeguarding the external sector while avoiding actions that could trigger market pessimism or speculative pressure on the rupee. 

The report noted that the RBI's reiteration that exchange-rate movements do not always reflect economic fundamentals sends a strong signal against speculative bets on the rupee. It argued that expectations of the currency weakening sharply towards the 100-per-dollar mark were not supported by fundamentals and could encourage unnecessary market speculation. 

SBI Research described the package of regulatory measures announced by the RBI as "progressive and bold", saying they would support economic growth while enhancing foreign capital inflows. 

Among the key measures, the central bank expanded the Fully Accessible Route (FAR) by including new 15-year, 30-year and 40-year government securities. The move is expected to improve foreign investor participation in longer-tenor bonds, lower long-term yields, reduce government borrowing costs and provide support to the rupee. The report added that the measure complements the government's recent tax incentives for foreign portfolio investors (FPIs) investing in government securities. 

The report also welcomed the RBI's concessional forex swap facility aimed at encouraging external commercial borrowings (ECBs) by public sector enterprises. According to SBI Research, the initiative could help reverse the decline in ECB and foreign currency convertible bond (FCCB) inflows, which fell nearly 30% to $42.9 billion in FY26 from $61.2 billion in FY25. 

Several public sector entities, including Power Finance Corporation (PFC), Rural Electrification Corporation (REC), EXIM Bank, Indian Oil Corporation (IOC), National Bank for Financing Infrastructure and Development (NaBFID), and NTPC , have recently tapped overseas markets for funding. 

SBI Research also highlighted the RBI's measures to promote Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits. By bearing the hedging cost and exempting incremental FCNR(B) deposits from CRR and SLR requirements until September 30, the central bank has created room for banks to offer more attractive returns to non-resident Indians (NRIs). 

The report estimates that banks could offer FCNR(B) deposit rates of 5.5% or higher without assuming unhedged currency risk. It added that the scheme could attract inflows exceeding the $34 billion mobilised during a similar exercise in 2013. 

According to SBI Research, a successful mobilisation of FCNR(B) deposits would ease pressure on domestic deposit mobilisation, improve banking system liquidity and help lower borrowing costs across money market instruments and government securities, thereby strengthening monetary policy transmission. 

On the policy outlook, the report said the RBI is likely to look through temporary inflation spikes and continue prioritising growth concerns. It expects the central bank to remain on pause at its August policy review, arguing that growth considerations are likely to outweigh market expectations of an aggressive rate-hiking cycle.