Stories
SBI Research Urges Tax Reforms and Capital Inflows to Bolster Rupee
- •SBI Research emphasizes that Reserve Bank of India measures to support the rupee have limits, necessitating structural government reforms.
- •Recommendations include removing long-term capital gains tax on equity and extending holding periods to encourage stable investments.
- •The report calls for greater clarity on withholding tax for external commercial borrowings and the Double Taxation Avoidance Agreement.
- •Faster repatriation of export proceeds within six months is advised to prevent delays in bringing foreign exchange back to India.
- •Foreign portfolio investors withdrew massive amounts from equities, underscoring the urgent need to improve conditions for foreign investment.
Key Questions Answered
SBI Research recommended encouraging longer-term equity investments by extending the holding period to two to three years and abolishing the long-term capital gains tax on equity. The report also called for greater clarity on withholding tax for external commercial borrowings and faster repatriation of export proceeds.
Foreign portfolio investors withdrew Rs 3.51 lakh crore from the equity segment between 2021 and September 2026, which included outflows exceeding Rs 2.61 lakh crore in 2026 alone.
The RBI introduced several measures, including a direct dollar-supply window for three state-run oil marketing companies, raising the daily CRR maintenance requirement to 99 percent, and open market sales of government securities worth Rs 25,000 crore. Additional steps include currency derivative position caps and a Foreign Exchange Risk Reserve requirement for large transactions.
