India has secured more than $73 billion in foreign currency inflows over the past 11 weeks, driven by a targeted incentive program for non-resident Indian (NRI) bank deposits. The initiative was launched to shore up the rupee amid rising energy prices and a widening trade deficit, which have otherwise fueled capital outflows.
Nearly $65 billion of the total inflows came into NRI bank deposits, according to government data. Nomura projects that these deposits could approach $80 billion before the incentive window closes on August 31, while Jefferies estimates that combined inflows from all related schemes could reach $100 billion by month-end.
Federal Reserve Chair Jerome Powell's recent remarks reinforced market expectations for a rate cut this month, putting pressure on the US dollar in early Wednesday trading and providing additional support for emerging market currencies.
The Indian government rolled out this deposit incentive scheme, formally known as the Foreign Currency Non-Resident (Bank) Deposits program, to bolster the rupee, which has been among Asia's worst-performing currencies against the dollar this year. The currency has depreciated 6.5% year-to-date, pressured by higher energy import bills and persistent capital outflows.
Gaura Sengupta, chief economist at IDFC First Bank, noted that despite the recent surge in energy prices, the reserve bank now has room to intervene in the currency market thanks to these inflows. She said the central bank is using the funds primarily to reduce rupee volatility rather than alter the currency's trajectory. The bank forecasts the dollar-rupee rate to reach 96.50 by March 2027, compared with Tuesday's market price of 95.7.
India's finance ministry has described the deposit initiative as the nation's "largest and fastest foreign currency mobilization effort." According to official disclosures, more than $65 billion has already flowed into these deposits. Nomura expects the total to approach $80 billion before the incentive period expires on August 31.
Official records show that a similar policy in 2013 attracted $26 billion in just three months. The finance ministry stated that the current inflows have strengthened India's external risk buffer in a highly cost-effective manner.
In June, the Reserve Bank of India introduced targeted incentives for NRI foreign currency deposits, overseas foreign currency borrowings, and external commercial borrowings. Jefferies noted in a Monday report that the current inflow has already exceeded institutional expectations, with combined fundraising across all schemes potentially hitting $100 billion by month-end.
India continues to experience capital flight as elevated global energy prices widen the trade deficit. Foreign investors offloaded Indian stocks heavily in March, marking a significant capital exodus. Through August, direct foreign equity outflows this year have already surpassed last year's total divestment of $18.9 billion.
Meanwhile, data from India's Ministry of Commerce and Industry shows that the trade deficit for April-July in the 2026-27 fiscal year widened compared to the $32.3 billion recorded during the same period last year. Energy imports, which account for a substantial share of total imports, rose nearly 22% during that period.
LSEG data indicates that multiple factors are weighing on the rupee, making it one of Asia's worst-performing currencies against the dollar this year. Citigroup projects that India's balance of payments surplus will reach $53 billion in the current fiscal year ending March 2027, down from $60 billion in the previous fiscal year. The bank cautions that after the deposit incentive scheme concludes in August, the trajectory of India's balance of payments will depend on international oil prices and inflows from foreign direct investment and foreign portfolio investment.