RBI Rupee Package Sends PSU Bank Stocks Surging

RBI's June 5 Move: What Actually Happened The RBI's rupee-support package, announced at the June 5 monetary policy meeting, is one of the more structurally significant policy moves for Indian capital markets in recent years. It has three main planks: subsidised FX hedging costs for FCNR(B) deposits (foreign currency non-resident bank deposits), concessional swap facilities on External Commercial Borrowings for PSUs, and expanded Fully Accessible Route (FAR) coverage for long-dated government securities. Think of FCNR(B) deposits as a way for the Indian diaspora and foreign banks to park money in India without rupee risk. The new subsidised hedging makes that option significantly cheaper and more attractive. On the same day, the government removed capital gains and interest income taxes for Foreign Institutional Investors, effective retrospectively from April 1, 2026. That word "retrospectively" matters. It signals that policymakers want FII confidence baked in from the start of the financial year, not just going forward. Analysts at Nomura and Kotak Institutional Equities estimate the combined package could attract up to $40 billion in net inflows over 12-18 months. For context, India's total FII equity inflows in all of FY24 were approximately $22 billion. This package, if it delivers, would roughly double that in a shorter window. Markets responded fast. The Nifty PSU Bank Index surged 3.62% on June 9, a single-session move that tells you institutional desks had already been positioning before the official reaction. PSU Banks: The Clearest Beneficiaries Here's the direct transmission mechanism. When foreign capital flows into India, whether through FAR-route G-sec purchases or FCNR(B) deposits, it lands first in the banking system. PSU banks hold a dominant share of FCNR(B) deposit mobilisation and act as primary dealers in government securities. They sit at the front of that queue. [State Bank of India](/stock/SBIN) (NSE: SBIN) has the most exposure to FCNR...