RBI MPC Meeting 2026 LIVE: Repo rate unchanged at 5.25%, policy stance neutral; 5 measures to attract dollars

RBI Monetary Policy Meeting, June 5, LIVE: Upside risks to inflation and downside risks to growth amid the West Asia conflict prompted the RBI’s rate setting panel to keep the policy repo rate on hold at 5.25 per cent at its three-day meeting, which concluded today.

The RBI announced a host of measures to attract dollar inflows, including expanding the specified securities under the Fully Accessible Route (FAR) route, incentivising PSUs to tap ECBs for a limited period.

In its second meeting of FY27, the Monetary Policy Committee (MPC) left the repo rate, which was last cut in December 2025 from 5.5 per cent to 5.25 per cent, unchanged. With this, the MPC has been on hold in three meetings on the trot – February, April and June 2026.

The RBI revised real GDP projection downward at 6.6 per cent (6.9 per cent projected earlier) and upped the retail (Consumer Price Index/ CPI-based inflation projection to 5.1 per cent (4.6 per cent) for FY27.

FY27 GDP growth forecast cut to 6.6% from 6.9% projected earlier.

“The decision to maintain status quo on the Repo rate and to continue with the Neutral stance is as expected. The 50-bps upward revision in the baseline CPI inflation forecast with risks seen on the upside, have strengthened the case of rate hike in the next meeting. Real repo rate based on the revised inflation forecast is now well below the real neutral policy rate, indicating that monetary tightening will have to pursued in a calibrated manner going forward. That said, monetary policy will essentially respond to the passthrough of imported inflation to the headline CPI inflation without exerting undue pressure of growth. While supply side inflation pressures have increased, demand side pressures remain benign, especially if we consider core inflation excluding the precious metals inflation. Measures announced to boost capital inflows, along with government decision to exempt tax on FPI debt investments, will help stabilize the exchange rate by attracting capital and shoring up forex reserves.”

“The MPC policy was broadly in line with expectations, but the more significant takeaway lies in the measures announced around foreign capital flows, external borrowing and forex management. The bond market’s reaction reflects this clearly. While government security yields softened by around 4 basis points, corporate bond yields declined nearly 25 basis points, indicating that markets are responding more to the structural measures than to the policy stance itself.

Over the last two years, policy rate cuts have not fully translated into lower market borrowing costs for corporates and PSUs, largely due to supply pressures in the domestic debt market and strong credit demand from the banking system. The latest measures could help address this imbalance. Lower hedging costs and improved overseas borrowing conditions may encourage PSUs to access international markets, reducing domestic supply and supporting lower bond yields.

The policy also reinforces confidence in India’s macroeconomic position. Growth remains among the strongest globally despite some moderation, while inflation continues to stay within the RBI’s target band. Alongside FCNR and forex-related initiatives, the measures reflect a balanced approach towards supporting growth, maintaining stability, strengthening the external sector and creating a constructive outlook for the bond market. Overall, the policy reflects a balanced approach towards supporting growth, maintaining inflation discipline and strengthening the external sector.”

“RBI acknowledged significant risks from oil prices, geopolitics, El Niño and weak monsoon. Yet it chose to hold rates and maintain a neutral stance, indicating that future action will depend on incoming inflation and growth data rather than a pre-committed tightening or easing path. The decision reflects a balancing act between rising inflation risks, managing rupee and growth amid heightened global uncertainty. However, we believe if inflation continues to remain at elevated levels we could see a possible rate hike. The policy is also beneficial for PSU Banks and NBFCs as rates would remain largely stable, also there could be fresh deposit inflows in FCNR accounts as hedging cost is taken care of which should allow banks to offer better rates.”

“The RBI delivered a policy rooted in the Tinbergen principle, clearly separating instruments across objectives. While the MPC remained focused on price stability by keeping the repo rate unchanged, the RBI complemented this with measures aimed at boosting capital inflows. The expansion of the Fully Accessible Route (FAR) to include new 15-, 30- and 40-year G-Secs, along with the removal of FPI investment restrictions under the General Route, should enhance foreign participation in government securities and support the government borrowing programme. From a fixed income market perspective, the widening of the investable universe and easing of participation constraints should improve demand for longer-duration G-Secs, deepen market liquidity and support a more stable foreign investor presence in India’s bond market over time. Alongside the liberalisation of investment norms for NRIs, OCIs and other overseas individuals, the measures strengthen India’s capital account at a time when external financing conditions remain dynamic, while also supporting rupee stability.”

RBI has kept the repo rate unchanged at 5.25% and retained the neutral stance, reflecting a cautious and data-dependent approach amid heightened global uncertainties. MPC has revised its inflation forecast upward by 50 bps to 5.1% and lowered the growth forecast by 30 bps, factoring in the potential impact of the West Asia crisis, elevated crude oil and energy prices, global supply chain disruptions and weather-related risks such as a weak monsoon and El Nino on food inflation. While domestic demand continues to remain resilient, the RBI has chosen to await greater clarity on the evolving inflation growth dynamics before taking any further policy action.

The policy carries a mildly hawkish undertone. With inflation projected at 5.1% against a repo rate of 5.25%, the scope for maintaining the current rate setting over an extended period appears increasingly constrained unless inflation shows a clear and sustained moderation. The RBI’s communication underscores its continued vigilance on inflation risks, particularly from crude oil and food prices, while keeping future policy options open should price pressures intensify. Simultaneously, the central bank has assured comfortable liquidity conditions through government spending, RBI dividend transfers, moderation in currency leakage and enhanced FX swap operations, which should support system liquidity and provide some relief to deposit mobilisation pressures faced by banks.

RBI has also announced a series of measures aimed at attracting foreign exchange inflows and strengthening external sector resilience. These initiatives are positive for the rupee, the Balance of Payments and overall market confidence. Overall, the policy reflects a cautious, wait and watch approach with a balanced focus on inflation management and growth support. Bond yields are expected to remain range-bound in the 6.90%-7.10% band in the near term, while the rupee is likely to draw support from the announced FX measures and improving liquidity conditions.

The rupee appreciated 50 paise to 95.24 against the US dollar on Friday after the RBI liberalised norms for FPI investment in government securities.

Forex traders said the announcements in the RBI policy boosted investor sentiments after the apex bank asserted that the country's forex reserves provide sufficient buffer against external shocks.

The RBI’s decision to hold the repo rate at 5.25% was widely expected. The more important message from this policy is that India’s key macroeconomic challenge is no longer domestic demand—it is the external sector. While inflation remains below target today, the RBI has raised its inflation outlook to 5.1%, with inflation projected to approach 6% later in the year. This is due to rising oil prices, supply-chain disruptions, and an uncertain monsoon. These are largely supply-side pressures that monetary policy alone cannot effectively address.

At the same time, growth has moderated but remains resilient, supported by healthy manufacturing activity, strong credit growth, and continued government capital expenditure. The economy is slowing at the margin, not stalling.

What stands out is the RBI’s growing focus on external vulnerabilities. Higher oil prices threaten to widen the current-account deficit, while persistent foreign portfolio outflows and elevated global uncertainty could make external financing more challenging. The central bank’s accompanying measures to attract capital and strengthen external financing conditions signal a clear shift in priorities.

This is not the posture of a central bank primarily concerned with domestic inflation. It is the response of a central bank preparing for potential external stress. The real debate is no longer whether rates move by 25 basis points, but whether India can successfully navigate a world of expensive oil, geopolitical uncertainty, and volatile capital flows. The rate pause was expected; the RBI’s quiet focus on protecting the external account is the story that will likely shape monetary policy in the months ahead.

The RBI Monetary Policy Committee’s decision to keep the repo rate unchanged at 5.25%, with the SDF at 5.00% and MSF and Bank Rate at 5.50%, reflects a calibrated and prudent approach in the current macroeconomic environment. By maintaining a neutral stance, the RBI has signalled its intent to closely monitor evolving inflation trends, global uncertainties and crude oil price volatility before undertaking further policy action. For the microfinance sector, rate stability is constructive as it supports predictability in borrowing costs and enables continued credit flow to low-income households, women entrepreneurs and underserved rural communities. With India’s growth trajectory remaining resilient and FY27 GDP growth projected at 6.6%, supported by domestic demand, government capex and consumption, we believe the policy environment remains conducive for inclusive credit growth and livelihood creation at the grassroots.

Unlike many other Asian central banks, the MPC has maintained its pragmatic approach of using policy rates for inflation management while relying on other measures for currency support. The policy rate and neutral stance have been maintained despite elevated global uncertainty and energy prices.

Nonetheless, the 50-bps increase in FY27 inflation projections to 5.1% and core inflation to 4.7% highlights forward-looking risks stemming from the prolonged West Asia conflict and monsoon-related uncertainties. The FY27 growth projection has also been moderated to 6.6%.

The reaffirmation of the RBI’s commitment to providing sufficient liquidity is a welcome relief. However, what clearly stole the show was the series of measures announced to boost dollar inflows, including an expanded FAR security universe, a fully hedged facility for ECBs, and 3–5 year FCNR(B) deposits.

Separately, the government has relaxed taxation rules for FPIs investing in G-Secs, which could also enhance the likelihood of their inclusion in the Bloomberg Global Bond Index.

Overall, while the overhang of potential policy rate hikes remains in forthcoming policies, immediate concerns have been adequately addressed and are likely to trigger a market rally across the yield curve.

This policy is best read as a balance of payments package with a rate decision attached. By holding the repo rate at 5.25 per cent with a neutral stance even while raising the FY27 inflation forecast by 50 basis points to 5.1 per cent, the RBI has drawn a clean line: the rate instrument is reserved for inflation, and the rupee will be def