India has received $7 billion in FII inflows since the government announced measures to boost foreign inflows and support the rupee, according to a report by SBI Research. The Indian currency has appreciated around 2.2% till June end from its lowest level of ₹96.8 against the US dollar on May 20, 2026. The government and Reserve Bank of India introduced a comprehensive set of measures including exemption of FIIS and FPIs from tax on sovereign bonds, subsidised hedging costs on FCNR(B) deposits, and a concessional dollar-swap window for PSU loans. These measures were implemented to counter the impact of rising crude prices due to Middle East conflict, with the government's intervention proving effective in stabilising foreign investor sentiment.
The banking system has witnessed a remarkable surge with deposits increasing by around ₹7 lakh crore during the fortnight ended June 30, 2026, resulting in the third-highest fortnightly growth in 29 years, as reported by SBI Research. This surge comes primarily from FCNR(B), portfolio flows, and ECB, with capital flows estimated at around $15 billion. The Reserve Bank of India's foreign currency reserves increased by $4.4 billion during the fortnight, while commercial paper issuances and incremental bank credit showed strong growth. CP issuances rose in Q1FY27, with June issuances hitting a 55-month high, while incremental bank credit rose to ₹5.6 lakh crore in Q1FY27 compared with ₹2.4 lakh crore in the corresponding period last year.
Despite recent geopolitical tensions that have put upward pressure on the exchange rate, the outlook remains positive with average crude oil price for Indian basket now expected at $80 billion or lower, leading to savings of at least $30 to $35 billion in oil import bill against previous estimates when oil prices had crossed $130 per barrel, according to SBI Research. The top sectors with higher CP issuances also recorded stronger bank credit growth and accounted for around 69% of new project announcements in Q1FY27. Banks had been borrowing through certificates of deposit (CDs), however this trend is expected to reverse, with liquidity likely to become more comfortable. The government's intervention through tax exemptions and subsidised hedging costs has made Indian debt more attractive to FPIs while contributing to rupee stability.
Despite July's positive turnaround, foreign investors have withdrawn a net ₹2.6 trillion from Indian equities in 2026 so far, exceeding the ₹1.66 trillion withdrawn in the same period of 2025. As reported by The Hindu BusinessLine, The Economic Times, Business Standard, NDTV Profit, and Press Trust of India, this represents a significant shift in foreign investment patterns, with the current year's outflows already surpassing the entire previous year's total. The data from Central Depository Services (India) Ltd (CDSL) shows this as the largest annual outflow since March's massive withdrawal. According to The Economic Times and Press Trust of India, the sustainability of FPI inflows will depend on global developments and the resilience of India's domestic growth story.
