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Informist, Friday, Jun. 5, 2026

 

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--RBI Malhotra: MPC left repo rate unchanged at 5.25% 
--RBI Malhotra: MPC voted 6-0 to leave repo rate unchanged at 5.25% 
--RBI Malhotra: MSF, Bank rates remain unchanged at 5.50%; SDF rate at 5.00% 
--RBI Malhotra: MPC decided to maintain 'neutral' policy stance 
--RBI: Minutes of Jun MPC meeting to be released on Jun 19

 

MUMBAI/NEW DELHI – The Reserve Bank of India's Monetary Policy Committee Friday left the policy repo rate unchanged at 5.25% in a unanimous decision even as risks to growth and inflation rose from the war in West Asia, said Sanjay Malhotra, the central bank's governor. The committee also retained its 'neutral' policy stance.

 

Malhotra said there are considerable risk to inflation and growth from the conflict in West Asia. While domestic activity remained largely steady despite the outbreak of the war, high energy prices and supply disruption are likely to weigh on the economy, Malhotra said. 

 

Inflation is seen rising because of the high energy prices even as underlying inflation pressures remain benign at this point, the governor said. The Monetary Policy Committee expects the impact of supply shocks to wane March quarter onward, Malhotra said. 

 

The rate-setting panel's decision was on expected lines. Most economists and market participants polled by Informist expected the Committee to maintain the repo rate, even as some projected a 25-basis-points rate hike to defend the rupee and in view of higher inflation. The committee lowered the repo rate by 125 bps in 2025, the most in a calendar year since 2019. It last raised interest rates in February 2023. 

 

The RBI lowered its GDP growth forecast for the current financial year by 30 bps to 6.6%, with growth seen between 6.3% and 6.8% throughout the year. India's GDP is estimated to have grown 7.6% in FY26, the provisional data for which will be released at 1600 IST Friday along with the March quarter growth print.

 

The central bank raised its CPI inflation projection for FY27 by 50 bps to 5.1%, because of higher energy prices and the expectation of below-normal monsoon rains, Malhotra said. CPI inflation is seen rising to 5.9% in the December quarter, near the upper bound of the RBI's 2-6% tolerance band with 4% as the medium-term target. 

 

"Looking ahead, elevated energy and other commodity prices coupled with continued supply disruptions are likely to affect economic activity," the monetary policy statement said. "The full impact, however, will depend on the duration of the conflict, time taken for normalisation of supply chains and the burden-sharing approach among the stakeholders."

 

Malhotra announced measures to bring in foreign capital amid pressure on the Indian rupee. The cental bank has included all new issuances of 15-, 30- and 40-year tenor government bonds in the fully accessible category for foreign investors. "These measures along with the tax benefits provided by the government this morning should help attract foreign capital for government borrowing," Malhotra said. The government Friday removed the capital gains tax for foreign investors in government bonds.

 

 

Malhotra also announced increased limits for investment by non-resident Indians and overseas citizens of India in equity instruments traded on the stock market without Securities and Exchange Board of India registration. "While these measures are expected to strengthen our balance of payments, we will continue to make the right policy adjustments to further promote exports and attract and incentivise capital inflows," Malhotra said. 

 

With the repo rate left unchanged at 5.25%, the Standing Deposit Facility rate remains at 5.00% and the Marginal Standing Facility and bank rate at 5.50%. Minutes of the MPC's June meeting will be published on Jun. 19. The next meeting of the MPC is scheduled for Aug. 3-5.  End

 

Reported by Aaryan Khanna, Pratiksha, and Shubham Rana

Edited by Akul Nishant Akhoury

 

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