India faces $17bn foreign outflows, prompting swift financial market reforms.
RBI and SEBI ease rules to attract investors and boost credit access.
Climate-risk disclosures planned to steer finance toward greener, resilient investments.
India is accelerating financial reforms to make India’s markets more lucrative and easier to invest in. This move comes considering about $17bn foreign outflows this year—one of the biggest outflows in Asia, reported Reuters.
The Reserve Bank of India (RBI) and market regulator, SEBI are working to make it simpler for foreign investors and companies to enter Indian markets, help banks lend more easily and support mergers, and attract small-town Indian investors to participate more in the stock market.
Other areas of regulatory easing in India's $260bn financial sector are under discussion to be rolled out over the next six-to-12 months, said six regulatory and market sources with knowledge of the matter.
The possible changes include bolstering capital market participation by mom-and-pop investors in smaller towns and further easing banking regulations, said the sources.
The dismantling of decades-old restrictions comes as Prime Minister Narendra Modi pushes for greater economic self-reliance after concerns about the hit to India's growth from punitive US tariffs unnerved foreign investors, reported Reuters.
A SEBI spokesperson, told Reuters that it has introduced 11 "major reforms" for foreign investors to improve their access to India and enhance India’s global competitiveness.
"There is an increased focus on ease of doing business and the regulatory cholesterol clogging up the financial sector is being cleared," Srini Srinivasan, managing director, Kotak Alternate Asset Managers, which manages $20bn in assets told Reuters.
Foreign Outflows Hit Hard
According to Reuters, foreign investors have net sold a large amount of money out of Indian stocks in 2025 amounting to about $17bn compared with $124mn in inflows in 2024 and $20bn in 2023. The sell-off has made India the worst-hit Asian market in terms of foreign portfolio withdrawals.
The initiatives China has announced in recent months, such as opening its stock option market to foreign investors and increasing foreign access to its bond repurchase market, align with the slow loosening in India.
Groundwork for Green Finance
India’s push to reform its financial sector is also laying the groundwork for green finance—the RBI is set to mandate climate-risk disclosures for banks, indicating that regulatory upgrades are not just about growth—but also about steering capital toward low-carbon and resilient investments
According to Reuters, the RBI's norms, which have been in the works since 2022, are expected to ask banks and financial institutions to make regular disclosures about climate-related risks in their loan portfolios along with mitigation strategies and targets.
