India races to reform financial sector as foreigners pull $17b

MUMBAI, Oct 27 (Reuters): Rattled by nearly $17 billion in foreign outflows this year, India is doubling down on financial sector reforms in a push to beef up capital buffers and lift investment in the country amid wider worries about the economic hit from US tariffs.

Several measures to anchor foreign participation and boost credit have already been announced by the central bank and market regulator in recent months. These include quicker pathways for companies to list and foreign funds and overseas lenders to enter and rules that allow corporates to borrow more easily and banks to finance mergers.

Other areas of regulatory easing in India's $260 billion 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.

The sources declined to be named as they were not authorised to speak to the media.

The central bank did not respond to a Reuters request for comment on new possible easing measures. A SEBI spokesperson, in response to Reuters queries, said it has introduced 11 "major reforms" for foreign investors to improve their access to India and enhance India's global competitiveness.