India has attracted $7 billion from foreign institutional investors (FIIs) following recent government measures to stabilize the rupee, states an SBI Research report. The Indian rupee has strengthened by about 2.2% against the US dollar since May, hitting a low of Rs 96.8 on May 20, 2026. To enhance foreign inflows and bolster the rupee amidst rising crude prices due to Middle East tensions, the government and Reserve Bank of India implemented various measures last month. These initiatives included tax exemptions for FIIs and FPIs on sovereign bonds, subsidized hedging costs for FCNR(B) deposits, and a concessional dollar-swap window for PSU loans.
The recent surge in geopolitical tensions, triggered by the US-Iran ceasefire termination, has exerted upward pressure on the exchange rate, leading to rupee depreciation. Despite these challenges, the outlook remains positive, with the average crude oil price for the Indian basket projected to stay at $80 billion or lower. This forecast is anticipated to result in significant savings of $30 to $35 billion in the oil import bill compared to previous estimates when oil prices exceeded $130 per barrel, as per the report.
Moreover, the Reserve Bank of India witnessed a $4.4 billion increase in foreign currency reserves in the recent fortnight. Additionally, commercial paper (CP) issuances and incremental bank credit surged in the first quarter of FY27. CP issuances peaked in Q1FY27, with June marking a 55-month high, while incremental bank credit rose to Rs 5.6 lakh crore in Q1FY27 from Rs 2.4 lakh crore in the corresponding period last year.
SBI Research highlights that sectors with higher commercial paper issuances also experienced robust bank credit growth, contributing to approximately 69% of new project announcements in Q1FY27. The report indicates a shift in banks’ borrowing patterns from certificates of deposit (CDs) to other sources. With a record deposit accretion of Rs 7 lakh crore by June 30, liquidity in the system is expected to improve.
Furthermore, banks have observed a gradual rise in overseas fund inflows following the introduction of the Reserve Bank of India’s revised Foreign Currency Non-Resident Bank (FCNR-B) deposit scheme. The industry has mobilized an estimated $3-4 billion through FCNR-B deposits to date, with expectations of accelerated collections, particularly from non-resident Indians in the Gulf region. Bankers anticipate that the revised scheme could attract $40-50 billion in fresh FCNR-B deposits over time, supported by higher interest rates and the Reserve Bank of India’s decision to cover banks’ hedging costs.
