Reserve Bank of India said on Thursday that India’s current account deficit narrowed to $5.2 billion in August 2026, a drop from $6.1 billion a year earlier, signalling a modest rebound in the country’s external finances.
The central bank also disclosed that the overall balance of payments turned a $45.4 billion surplus this month, up sharply from a $20.8 billion surplus in July, thanks to a surge in foreign‑currency inflows.
Foreign deposits from non‑resident Indians swelled to $83 billion in August, compared with a mere $1 billion a year before, while banking capital inflows reached $64.7 billion, a stark reversal from the $4.7 billion outflow recorded in August 2025.
The merchandise trade deficit, however, remained sizable at $26.6 billion, slightly better than the $27.6 billion seen last year, whereas services trade delivered a $16.5 billion surplus, up from $15.6 billion. New‑home foreign direct investment entered the market with net inflows of $3.3 billion, and foreign portfolio investment returned with $1.7 billion, overturning the $2.6 billion outflow of August 2025.
Over the April‑August window, the current account deficit widened to $18.3 billion from $12.8 billion, yet the cumulative balance of payments posted a $58 billion surplus, a stark contrast to the $0.8 billion deficit last year.
The RBI clarified on Thursday that its newly introduced Foreign‑Exchange Risk Reserve (FERR) applies only to specified derivative contracts with a notional value exceeding $2 million, and does not cover smaller contracts or those selling foreign currency against the rupee.
In a detailed FAQ, the central bank warned dealers against structuring transactions to skirt the FERR requirement, underscoring its intent to tighten foreign‑exchange exposure.
The next policy review will see the RBI weigh the FERR rules’ effectiveness, a move that could shape India’s foreign‑currency inflows in the coming months.