Big decision of Modi government and RBI at midnight! Now this rule will change completely, know today itself

New Delhi. Modi government and Reserve Bank of India (RBI) are preparing to take such a big decision regarding the country’s economy and market, which is going to change a lot in the coming days. This masterstroke of the government will not only strengthen the Indian rupee, but can also give a huge boost to the slowing economy.

What is the mega plan of Modi government and RBI?

According to a recent report by Bloomberg, a major policy change can be seen in terms of Indian economy and debt market. The government and RBI together are making big preparations backstage to handle the rupee which is struggling under the pressure of the international market and to bring a flood of foreign investment in the country. If sources are to be believed, the Union Cabinet may approve a very important proposal this week, which will make it easier and cheaper for foreign funds to enter the Indian bond market.

Preparation for huge cut in bond tax: Foreign investors will get free exemption

The biggest thing coming out in this new proposal is the huge tax relief. Under this, the heavy 20% tax on interest earned by foreign investors from Indian bonds can either be completely eliminated or it can be reduced significantly. The objective of the government behind this step is to bring the Indian tax structure at par with the global market, so that foreign portfolio investors (FPIs) can freely invest money in the Indian debt market without any hesitation.

However, when the Finance Ministry and RBI were contacted on this entire matter, they have refused to comment at present. But the report claims that the central bank had already advocated reducing the tax burden on foreign bond investors.

Reserve Bank will reopen closed roads

Not only this, RBI can reopen the way for foreign investors to buy some long-term sovereign bonds without any limit. Let us tell you that in the year 2024, RBI had excluded 14 year and 30 year government bonds from the list of ‘Fully Accessible Route’ (FAR). But now there is news that this list can be expanded again to attract foreign investors.

Why was this big step needed?

In fact, this year the Indian rupee has continuously weakened against the dollar and has gone through huge fluctuations. On May 20, the rupee had reached a record low of 96.9650 against the dollar. Since then, the government and the central bank are continuously scrambling to get the money out of the ventilator and manage it.

The reasons for this decline in rupee are not only domestic. Skyrocketing prices of crude oil in the global market, increasing trade tension due to American tariffs and geopolitical tension arising due to Iran conflict are the major reasons for this. Due to these reasons, foreign investors are continuously withdrawing their money from Indian markets. Experts believe that now it has become very important to give this ‘tax incentive’ to stop this outflow of foreign funds.

Luck of NRI and foreign investors will also shine

Under this master plan, the government can also notify the rules for investing in shares of listed Indian companies under the Portfolio Investment Scheme for ‘Persons Resident Outside India’ (PROI). This will make it very easy for NRIs and foreign citizens to invest directly in the Indian equity market.

If the government approves the tax reduction proposal this week, then the demand for Indian government bonds at the global level will increase rapidly. Due to increase in demand, bond prices will increase and yields will come down, which will directly benefit those Indian banks which have a huge portfolio of government securities.