2 min readSep 4, 2026 06:05 AM IST First published on: Sep 4, 2026 at 06:05 AM ISTIn June, the RBI announced several measures to boost capital flows into the country. There were, however, concerns over how much could be mopped up through various channels, considering the prevailing global financial conditions. Those worries have now been belied. By the end of August 31, inflows through the forex swap facility stood at a substantial $136.3 billion, with $63.5 billion coming in the last 10 days alone. Of the total flows, $127 billion has come through the FCNR(B) route, with the balance coming from the External Commercial Borrowings and Overseas Foreign Currency Borrowings channels. Flows have, thus, significantly exceeded expectations.The RBI’s forex reserves have risen to a record high of $729 billion as on August 21. This will help with maintaining external stability. But the surge in inflows is creating management issues for the central bank with the liquidity surplus increasing. According to a note from economists at Bank of Baroda, the liquidity surplus began to swell from over Rs 3 lakh crore since the beginning of August to Rs 6.7 lakh crore by the end of the month. The central bank has responded by conducting variable rate reverse repo auctions. But, other tools may also be needed. All this has come at a time when inflation is edging upwards and amidst expectations that the monetary policy committee will need to raise interest rates. Robust growth in the first quarter would certainly provide the committee the space and comfort to undertake a tightening.AdvertisementThe FCNR(B) flows have provided a reprieve. The rupee’s fall has been stemmed. But it does not address the underlying issues plaguing the economy. India runs a current account deficit and has in recent times not been able to attract sufficient stable foreign capital/investment. While over the past few months foreign portfolio investors have been net equity buyers and net FDI is inching upwards, tighter global financial conditions will influence flows. The larger issues need to be tackled to encourage foreign capital into the country.