FCNR inflows cushion rupee, BoP; FII flows crucial for sustained external stability: Report
Economic Times 1 hr ago·2 Oct 2026, 6:01 am
Foreign currency non-resident (FCNR) deposits have provided a crucial buffer for the Indian rupee and the country's balance of payments recently. This inflow of foreign currency helps stabilize the currency and covers the gap in India's trade deficit, which has reached a decade-high. However, this support is viewed as temporary, as these deposits are not a permanent source of funding.
For investors, this signals that the current external stability relies heavily on short-term inflows. The report suggests that Foreign Institutional Investor (FII) flows are now the key factor to watch. As the temporary cushion from FCNR deposits is absorbed, sustained stability will depend on the ability to attract long-term foreign investment.
Going forward, the market will closely monitor FII trends. A slowdown in these flows could challenge the rupee's resilience. Investors should keep an eye on global economic conditions and policy shifts, as these will determine whether India can maintain its external balance without relying on temporary measures.
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