India has attracted over $73 billion in foreign currency inflows over the past 11 weeks, primarily driven by special bank deposits from non-resident Indians (NRIs), as the country faces significant foreign capital outflows and a widening trade deficit due to rising energy prices [1]. Of these inflows, nearly $65 billion came from NRI bank deposits, with Nomura projecting that this figure could rise to nearly $80 billion before the incentive scheme ends on August 31 [1]. The Indian government launched this initiative to shore up the rupee, which has remained relatively stable despite increased energy import costs and ongoing foreign investor exits [1].
The Reserve Bank of India (RBI) has used these inflows to minimize currency volatility, though not to influence the rupee's overall direction, according to Gaura Sengupta, chief economist at IDFC First Bank [1]. Sengupta's firm expects the rupee to settle at around 96.50 per dollar by March 2027, compared to its current level of 95.7 [1]. The finance ministry described the incentivized deposit scheme, known as Foreign Currency Non-Resident (Bank) deposits, as India's "largest and fastest foreign-currency mobilization exercise," noting that these inflows have "fortified" the country's external buffers with "maximum cost-efficiency" [1].
Jefferies reported that the inflows have exceeded expectations and, combined with other measures, could total up to $100 billion by the end of the month [1]. This effort comes as India grapples with record foreign equity outflows, with foreign investors selling $12.7 billion in Indian equities in March and $24.5 billion so far this year, surpassing last year's $18.9 billion [1]. The trade deficit has also widened to $49.3 billion between April and July, up from $32.3 billion a year earlier, with energy imports rising nearly 22% during this period [1].
The current scheme echoes a similar initiative in 2013, which attracted $26 billion in three months [1]. The government began offering special incentives on foreign currency bank deposits, overseas foreign currency borrowings, and external commercial borrowings in June to attract these inflows [1].
CONCLUSION
India's special deposit scheme for non-resident Indians has successfully attracted substantial foreign inflows, helping to stabilize the rupee and strengthen external buffers amid significant capital outflows and a widening trade deficit. With incentives set to end on August 31, analysts expect inflows could reach up to $100 billion, providing crucial support to India's currency and financial stability in the near term.