'We recognise we need more foreign capital': FM Sitharaman signals more measures ahead

Finance Minister Nirmala Sitharaman on Monday said the government recognises the need for greater foreign capital inflows and indicated that more measures could follow recent reforms aimed at attracting overseas investors.

Speaking at the Mindmine Summit 2026 in New Delhi, Sitharaman said the government's decision to offer favourable withholding tax treatment for foreign investors was only the beginning of a broader effort to draw global capital into India.

"I think the withholding tax treatment which we have offered will be the first step towards drawing foreign capital back, although at the moment, it's confined to the bond market. But certainly that is not the end of the story, there will be more. We recognise we need more foreign capital to come in," she said.

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Earlier this month, the government waived taxes on foreign investors' capital gains from government securities and removed the withholding tax on their interest income. It also expanded the Fully Accessible Route (FAR) by adding new issuances of 15-year, 30-year and 40-year government bonds to the list of index-eligible securities.

In addition, the government removed investment limits under the General Route for government bonds, except for the overall 6% cap on holdings of a specific bond.

The Reserve Bank of India announced a facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits till Sept. 30. 

Previously, this mechanism was used in 2013, when the RBI had announced an FCNR deposit window to attract inflows. During the 2013 programme, the RBI had capped hedging support at 3.5%.

"As a result, the banks can now go unfettered to raise their own returns. So we have taken a very calibrated approach to make sure that the markets do see the required investment," Sitharaman said.

Sitharaman said there is a need to be prepared for exigencies arising out of the current global situation. "One week you have a challenge, the next week that challenge is addressed, but newer challenges come up," she said.

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The finance minister also cautioned that policymakers must remain prepared for rapidly changing global developments. "One week you have a challenge, the next week that challenge is addressed, but newer challenges come up," Sitharaman said.

She noted that the Indian economy was facing "severe strain" from imports of critical raw materials, crude oil and fertilisers amid sharp price fluctuations in global markets. 

"So price is a challenge, foreign exchange reserves will have to be adequately kept to meet growing demands. And growing demand is good because a growing economy requires these critical inputs," she said.

(With inputs from Informist)