India Accelerates Financial Sector Reforms Amid $17 Billion Foreign Outflows

Rattled by nearly $17 billion in foreign portfolio outflows this year, India is intensifying its financial sector reforms to attract investors and strengthen capital buffers. The Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) have rolled out several pro-business measures, including streamlined foreign investor access, easier borrowing norms for corporates, and expanded bank financing for mergers and acquisitions. The move comes as the Modi government pushes for greater economic self-reliance amid concerns over the impact of U.S. tariffs on growth.

Sources close to the matter revealed that additional reforms are under discussion, focusing on expanding retail participation from smaller towns and further liberalizing banking regulations within the next year. Both RBI Governor Sanjay Malhotra and SEBI Chief Tuhin Kanta Pandey—former finance ministry officials—are reportedly aligned in efforts to dismantle long-standing crisis-era rules that constrained liquidity and investment. Recent policy adjustments have eased capital buffer requirements for non-bank lenders, lifted restrictions on overseas borrowing for lower-rated firms, and simplified mutual fund access to retail investors.

Experts say these changes mark a decisive shift toward liberalization and could help restore investor confidence. “There is an increased focus on ease of doing business and the regulatory cholesterol clogging up the financial sector is being cleared,” said Srini Srinivasan of Kotak Alternate Asset Managers. Despite the current outflows, global investors such as M&G Investments remain optimistic, citing India’s strong growth outlook—projected at 6.8% for FY26—and a more accessible, investor-friendly environment.

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