RBI's capital flow measures could attract $75-80 billion, rupee may strengthen to 92-93: ICICI Bank's Jhingan

The Reserve Bank of India's latest measures to attract foreign capital could bring in as much as $75-80 billion and help the rupee strengthen to 92-93 against the US dollar, according to Shailendra Jhingan, Head of Treasury & Economic Research at ICICI Bank.

Speaking to CNBC-TV18 after the RBI's monetary policy announcement on Friday, Jhingan said the central bank's package of capital flow measures could generate sufficient inflows to fully finance India's current account deficit this financial year.

"Our preliminary assessment would be somewhere close to $40 billion on FCNR deposits, around $10-15 billion on PSU deposits," Jhingan said. He added that further inflows could come through India's eventual inclusion in Bloomberg's global bond indices.

"Over a six-to-nine-month period, you could see another $20-25 billion coming in through that route. So, in total, we are looking at somewhere in the ballpark of $75-80 billion," he said.

Jhingan said the expected inflows would support the balance of payments and strengthen the domestic currency. "I have a very constructive view. I think something like 92-93 is possible," he said, while cautioning that the outlook remains dependent on developments in the Middle East.

The comments came after the RBI left the repo rate unchanged at 5.25% for the third consecutive policy meeting. While the central bank retained rates, it unveiled a series of measures aimed at boosting foreign currency inflows and strengthening external-sector stability.

The RBI announced that it would bear the full hedging cost on fresh three-to-five-year Foreign Currency Non-Resident (Bank), or FCNR(B), deposits mobilised by banks until September 30, 2026. The move is expected to make such deposits more attractive for non-resident Indians and improve banks' ability to raise foreign currency funds.

The central bank also expanded the universe of government securities eligible under the Fully Accessible Route (FAR), allowing foreign investors unrestricted access to select long-dated sovereign bonds, including 15-year, 30-year and 40-year securities.

Samiran Chakraborty, Chief Economist at Citi India, estimated that the latest measures could attract $40-45 billion of incremental inflows, excluding any benefits from potential Bloomberg Index inclusion.

"These are significant measures that have bought time to manage both the overall balance-of-payments situation and the currency situation," Chakraborty told CNBC-TV18.

He said Citi expects the rupee to appreciate in the near term, with its zero-to-three-month forecast at 93 against the dollar. However, he cautioned that pressures could re-emerge later in the year if oil prices remain elevated and India does not secure inclusion in major global bond indices.

Former RBI Executive Director and IIM Kozhikode Professor Mridul Saggar said the central bank had adopted the correct strategy by using capital-account measures instead of interest rates to support the currency.

Saggar added that the worst phase for the rupee may have passed, although policymakers would need to remain vigilant amid continuing geopolitical uncertainty.

State Bank of India Chairman CS Setty said the RBI's measures could significantly improve liquidity conditions and ease funding pressures across the banking system.

"We have not done any calculations yet, but I think there should be good demand," Setty said on the FCNR(B) scheme.

He noted that banks had faced pressure from strong credit growth and elevated wholesale deposit rates. Additional inflows through FCNR(B) deposits and external commercial borrowings could help moderate funding costs and improve liquidity.

"I believe the overall liquidity support through these deposits will increase, which should moderate the cost of funds for banks," Setty said.

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Alongside the capital-flow measures, the RBI revised its macroeconomic projections. The central bank lowered its FY27 GDP growth forecast to 6.6% from 6.9% earlier while raising its inflation forecast to 5.1% from 4.6%, citing global uncertainties and inflation risks.

Despite the downgrade, economists remained relatively optimistic on growth. Chakraborty said Citi's FY27 growth forecast remains at 6.6%, while Setty described the recent GDP data as "pleasantly surprising", particularly the strength in manufacturing activity.

For markets, however, Friday's policy was less about interest rates and more about attracting foreign capital. With the RBI effectively opening multiple channels for inflows, economists believe the measures could provide a strong buffer for India's external accounts and support the rupee in the months ahead.