NRI Deposits Drive Strong Capital Inflows in July

India recorded a sharp increase in capital inflows in July 2026, with deposits from the Indian diaspora emerging as a major contributor to the country's external financial position.

According to data released by the Reserve Bank of India (RBI), net inflows into non-resident Indian deposits reached $33.5 billion in July, compared with just $1 billion during the same month a year earlier.

The substantial increase in NRI deposits helped strengthen India's capital account and contributed to a positive overall balance of payments despite a widening current account deficit.

India's Capital Account Receives a Major Boost

India's net capital account balance increased sharply to $27.7 billion in July 2026, compared with $3.5 billion in July 2025.

NRI deposits were one of the biggest contributors to the increase. Banking capital flows also rose to $18.4 billion during the month, compared with $6 billion a year earlier.

The figures demonstrate the important role that foreign capital and overseas Indian savings can play in supporting India's external financial position.

NRI Deposit Inflows Jump From $1 Billion to $33.5 Billion

The most striking change in the RBI data was the increase in NRI deposit inflows.

Net NRI deposits stood at $33.5 billion in July 2026, compared with only $1 billion in the corresponding month of 2025. For the April-July period, NRI deposits recorded net inflows of $36.2 billion, compared with $4.7 billion during the same period a year earlier.

The sharp increase indicates a significant rise in funds flowing into Indian banks from Indians living overseas.

Overall Balance of Payments Turns Strongly Positive

The surge in capital inflows helped India record an overall balance of payments surplus of $20.8 billion in July.

This was a substantial improvement from the $0.3 billion surplus recorded a year earlier. For April-July 2026, the overall balance of payments surplus stood at $12.7 billion, compared with $4.8 billion during the same period last year.

The positive balance indicates that capital inflows more than compensated for the country's current account deficit during the month.

Current Account Deficit Widens to $7 Billion

The strong capital account performance came at a time when India's current account deficit was widening.

India's current account deficit increased to $7 billion in July 2026 from $3.2 billion a year earlier. The deterioration was primarily linked to a larger merchandise trade deficit as imports increased faster than exports.

For April-July, the current account deficit reached $11.2 billion, compared with $6.6 billion in the same period a year earlier.

Merchandise Trade Deficit Remains a Key Concern

India's merchandise trade gap remained one of the biggest pressures on the current account.

In July, merchandise exports increased to $45.1 billion from $37.4 billion a year earlier. However, imports rose to $76.8 billion from $65.6 billion.

As a result, the monthly merchandise trade deficit widened to $31.7 billion from $28.2 billion.

For the April-July period, the merchandise trade deficit reached $117.8 billion, compared with $97.1 billion in the corresponding period last year.

Services Exports Provide Some Support

India's strong services sector helped partially offset the pressure from merchandise trade.

Net services receipts increased to $17.6 billion in July from $16.4 billion a year earlier. Between April and July, net services exports rose to $69.3 billion from $64.3 billion.

The performance reflects the continuing importance of India's information technology, business services and other export-oriented services industries.

Remittances Also Increase

Transfer receipts, which include remittances from Indians living abroad, also recorded growth.

Net transfer receipts increased to $13.2 billion in July from $12.6 billion a year earlier. During April-July, transfer receipts increased to $53.9 billion from $43.4 billion in the corresponding period of the previous year.

Remittances remain an important source of foreign exchange for India and provide financial support to households across the country.

Foreign Direct Investment Adds to Capital Inflows

Foreign direct investment also contributed positively to India's capital account.

Net FDI increased to $7.3 billion in July 2026 from $4.5 billion a year earlier. For April-July, net FDI rose to $13.4 billion from $9.7 billion.

Gross FDI inflows into India reached $10.7 billion in July, compared with $7.2 billion a year earlier, while outward FDI increased to $3.4 billion from $2.7 billion.

Foreign Portfolio Investment Turns Positive

Foreign portfolio investment flows also improved during July.

India recorded net FPI inflows of $4.1 billion in July, compared with an outflow of $2.5 billion in July 2025.

However, the April-July period still recorded net FPI outflows of $5.5 billion, compared with an outflow of $0.9 billion during the year-earlier period.

This shows that portfolio investment remained more volatile than longer-term capital sources such as FDI and NRI deposits.

External Commercial Borrowings Remain Negative

Not all components of the capital account showed improvement.

External commercial borrowings recorded a net outflow of $2.3 billion in July, compared with a net inflow of $1.4 billion a year earlier.

For April-July, the balance was a net outflow of $1.3 billion, compared with a net inflow of $6.8 billion during the corresponding period last year.

This partly offset the positive contribution from NRI deposits, FDI and portfolio investments.

Why NRI Deposits Matter for India

NRI deposits provide Indian banks with access to foreign currency and other overseas savings.

A significant increase in such deposits can strengthen India's external financing position and provide additional liquidity to the banking system.

The July figures are particularly notable because the increase was much larger than the inflows recorded in the previous year.

Strong NRI Flows Help Offset External Pressures

India continues to face pressure from its merchandise trade deficit, making stable capital inflows important for maintaining external balance.

The sharp rise in NRI deposits helped compensate for the wider current account deficit in July and contributed to the overall balance of payments surplus.

This demonstrates how capital flows can play a crucial role when trade-related pressures increase.

India's External Position Shows Mixed Signals

The latest RBI data presents a mixed picture of India's external sector.

On one side, the current account deficit widened because of the larger merchandise trade gap. On the other, services exports, remittances, FDI, FPI and especially NRI deposits provided significant support to the capital account.

The overall result was a strong balance of payments surplus despite the current account deficit.

NRI Deposits Become an Important Source of Foreign Capital

The July data highlights the increasing importance of India's global diaspora in the country's financial system.

NRI deposits of $33.5 billion in a single month represent a substantial increase from previous levels. The April-July figure of $36.2 billion also shows that the majority of the year's NRI deposit inflows occurred during July.

Such flows can help strengthen India's ability to finance external deficits.

What the RBI Data Means for the Indian Economy

The latest numbers suggest that India's external finances remain supported by several strong sources of foreign exchange.

Services exports and remittances continue to provide recurring inflows, while FDI and NRI deposits are supporting the capital account.

However, the widening merchandise trade deficit remains an important risk that policymakers will need to monitor.

What Could Happen Next?

The sustainability of India's external position will depend on whether strong capital inflows continue in the coming months.

NRI deposit flows, FDI, portfolio investment, services exports and remittances will remain important indicators to watch.

At the same time, the trajectory of imports and exports will determine how much pressure the merchandise trade deficit places on the current account.

Bottom Line

India's capital account received a major boost in July 2026 as net NRI deposit inflows surged to $33.5 billion from $1 billion a year earlier. The sharp inflow helped push the net capital account balance to $27.7 billion and contributed to an overall balance of payments surplus of $20.8 billion.

The strong capital inflows were particularly important because India's current account deficit widened to $7 billion in July, largely due to a bigger merchandise trade deficit.

The RBI data shows that India's external position is being supported by the country's large overseas diaspora, services exports, remittances and foreign investment. However, continued monitoring of the merchandise trade deficit and the sustainability of capital inflows will remain important for India's external-sector stability.