India is moving swiftly to reform its financial sector after nearly $17 billion in foreign outflows this year, the sharpest withdrawal among Asian markets. The government and regulators are now doubling down on capital market liberalization and credit expansion to stabilize investor sentiment and strengthen the country’s financial system amid growing concerns over the impact of U.S. tariffs.
In recent months, the Reserve Bank of India (RBI) and SEBI have introduced key measures, including:
- Faster listing pathways for companies and foreign funds;
- New borrowing flexibility for corporates and banks financing M&A;
- Eased capital buffer requirements for infrastructure financiers;
- Loosened restrictions on overseas debt for lower-rated borrowers.
More deregulation steps are expected within 6–12 months, focusing on retail investor participation in smaller towns and further banking sector liberalization.
“The regulatory cholesterol clogging up the financial sector is being cleared,” said Srini Srinivasan, Managing Director at Kotak Alternate Asset Managers.
Foreign investors have been net sellers of Indian equities, but the government is betting on ease-of-doing-business reforms and targeted incentives to revive inflows. According to M&G Investments, the easing measures and India’s strong growth outlook (projected at 6.8% for FY2026) make the market “increasingly investor-friendly.”
New leadership at the RBI and SEBI — Governor Sanjay Malhotra and Chairman Tuhin Kanta Pandey — is driving this shift, with a focus on pragmatic liberalization after years of tight post-crisis regulation.
“The current governor is leaning toward liberalisation and optimum regulation,” said former RBI Deputy Governor H.R. Khan.
While deregulation marks a positive step, experts like Ian Simmons of Fiera Capital note that deeper bureaucratic and judicial reforms are still needed to fully unlock India’s market potential.