India’s currency has been under pressure for quite some time, with the rupee touching record lows against the US dollar. This depreciation is caused by several factors, including economic uncertainty, record foreign fund outflows and a rising import bill, putting pressure on the country’s fiscal.
The rupee has depreciated nearly 7% so far in 2026 and is down roughly 6% since the outbreak of the Iran conflict on 28 February. This situation has prompted the government and the Reserve Bank of India () to step up efforts to attract foreign capital and protect the domestic currency. Here are some measures that have been taken so far.
FII tax exemption on G-Secs
Under the Income Tax Amendment Ordinance, 2026, the government granted full tax exemption on interest income and capital gains earned from government securities by foreign investors. This benefit was also extended to the Bank for International Settlements (BIS).
Before this exemption was introduced, both interest income and capital gains from government securities were taxed under the framework. Foreign investors had to pay 12.5% long-term capital gains tax (LTCG) on government bonds that were held for more than 12 months. If the bond is held for less than 12 months, then 20% short-term capital gains tax is applicable.
Higher investment limits for overseas individuals
The RBI has announced higher investment limits for non-resident individuals (NRIs), overseas citizens of India (OCI) and all individual persons residents outside India (PROIs).
This provision allows them to invest larger amounts in Indian financial markets without requiring registration with the Securities and Exchange Board of India (Sebi). The move is aimed at facilitating greater overseas participation in Indian capital markets.
Under this scheme, the investment limit for an individual PROI will be increased from 5% to 10% in any company, with an overall investment limit for all individual PROIs to 24%, from the current 10%. The new rules will also simplify onboarding and reduce compliance requirements.
Concessional forex swap facility for PSUs
The RBI has decided to provide a facility of concessional foreign exchange swap for Public Sector Undertakings () to reduce hedging costs on foreign currency loans, according to media reports.
The measure is aimed at encouraging PSUs to raise funds through External Commercial Borrowings (ECBs), thereby supporting foreign currency inflows into the country. The central bank will soon issue a detailed circular on how the mechanism will be operational.
“The PSU ECB swap facility will offer further incentives to PSUs to borrow in US dollars (ECB) and swap into rupee, similar to the 2013 RBI FX swap window,” Business Standard reported, citing a report by Barclays.
New issuance of govt securities now under FAR
The central bank expanded the universe of government securities eligible under the Fully Accessible Route (FAR) by including all new issuances of 15-year, 30-year and 40-year sovereign bonds.
The RBI also removed restrictions on short-term investments, concentration limits and individual security limits for Foreign Portfolio Investors (FPIs) investing through the General Route.
These central bank measures, along with tax exemptions announced on investments in government securities, are expected to support foreign participation in India’s sovereign debt market and facilitate government borrowing at affordable interest rates, Mint reported earlier.