In an interaction with ETMarkets, Keyur Majmudar highlighted that recent regulatory changes by the Reserve Bank of India (RBI) could potentially attract more than $20 billion in foreign inflows into India. These changes are expected to enhance overseas deposit mobilisation by banks and enable corporates to benefit from a revised borrowing framework.
The sentiment towards India has improved since March, largely due to easing geopolitical tensions in West Asia. Although this optimism is not fully reflected in headline indices, several businesses across sectors continue to perform well, indicating healthy corporate fundamentals. Encouraging quarterly results further support this positive outlook.
The RBI's relaxation of FCNR(B) deposit norms and easing of External Commercial Borrowing (ECB) norms are anticipated to drive significant foreign currency inflows. Estimates suggest potential inflows exceeding $20 billion, with banks actively mobilising overseas deposits and corporates leveraging the revised borrowing framework.
“There has been a noticeable improvement in sentiment since March, driven largely by developments in West Asia.”
Keyur Majmudar
At 7.50% per annum, USD FCNR(B) deposits appear attractive compared to similar fixed-income options in other NRI markets. While current market estimates suggest slightly lower effective rates, the regulatory relaxations enhance the overall proposition. The effective return profile becomes more compelling once the cost of foreign exchange hedging is absorbed.
Majmudar advises NRIs to focus on high-quality businesses benefiting from India's consumption growth, digital ecosystem expansion, and financialisation of savings. He emphasizes the importance of sustainable competitive advantages over sector-specific investments.
Background
India has been implementing various regulatory changes to attract foreign investments, with the RBI playing a crucial role in facilitating these inflows. Historically, such reforms have been instrumental in boosting investor confidence and enhancing India's economic growth prospects.
As India continues to implement regulatory reforms, investors should monitor the impact of these changes on foreign inflows and market dynamics. The potential for significant inflows underscores India's attractiveness as an investment destination.
