Macro & cycles

The RBI is rerunning its 2013 rupee rescue

Aabhas TripathiAabhas Tripathi17 August 2026

As of May 2026, the rupee’s real effective exchange rate, its value against trading partners adjusted for inflation, touched its lowest level since the 2013 taper tantrum. The depreciation has been driven by capital flows rather than fundamentals: net FDI and FPI inflows have thinned for three straight years even as India’s share of gross global FDI kept rising. The RBI’s answer is nearly a line-for-line rerun of what worked in 2013.

FCNR(B) deposits · potentialFresh 3–5 year FCNR(B) deposits with hedging cost borne by RBI till 30 Sep 2026 · potential $40–60 billion$40–60 bnof which raised by 17 JulMobilised under FCNR(B) as of 17 July 2026 · approximately $17 billion~$17 bnConcessional forex swapConcessional forex swap incentivising PSU external borrowing at 1.5% fixed till 30 Sep 2026 · potential $15–25 billion$15–25 bnG-sec tax relief · index flowsWithdrawal of capital gains and withholding tax on G-sec returns, raising odds of bond-index inclusion · potential $10–20 billion over 12–18 months$10–20 bn
Potential dollar inflows from the 2026 measures, per RBI and market estimates. Bars show upper bounds of published ranges. Data: RBI, SEBI, Avendus Spark via HDFC MF Lighthouse (July 2026).

The centrepiece is the FCNR(B) scheme: banks raise three-to-five-year foreign-currency deposits from NRIs, and until 30 September 2026 the RBI bears the full hedging cost. The 2013 edition of this scheme brought in $34 billion; the current round is projected at $40–60 billion and had already mobilised roughly $17 billion by 17 July. Around it sit three supporting measures: a concessional forex swap for public-sector borrowing abroad ($15–25 billion potential), the opening of long-dated G-secs to foreign investors, and the withdrawal of capital gains and withholding tax on G-sec returns, which raises the odds of India’s bonds entering another global index and drawing $10–20 billion more.

The 2013 precedent is the reason to take the playbook seriously. After the taper-tantrum measures, India’s FX reserves rose by $68 billion over the following three fiscal years, and the dollar-rupee rate, which had been in free fall through mid-2013, moved sideways for the better part of two years. The same sequence starting from today’s far larger reserve base would be a smaller relative shock absorber, but the mechanism is identical: import dollars through deposits and bonds until the flow account stops setting the currency’s price.

For portfolios the transmission is straightforward. A stabilised rupee removes the largest single deterrent to foreign flows into Indian equities and bonds, and the sectors that absorbed the most FPI selling have the most to recover. It also caps imported inflation, which protects the case for rates staying benign.

What we’ll watch: the FCNR(B) mobilisation run-rate against the $40–60 billion projection as the 30 September deadline approaches, and whether the rupee’s real effective exchange rate climbs off its 2013-era low.

Source: Data: Bloomberg, Avendus Spark, RBI; as of July 2026.
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