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Invesco Mutual Fund fixed income head Vikas Garg on RBI Policy
This story was originally published at 12:38 IST on 5 June 2026
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MUMBAI – Vikas Garg, head of fixed income, Invesco Mutual Fund, said the following on the Reserve Bank of India's second bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Friday:
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 (fully accessible route) security universe, a fully hedged facility for ECBs (external commercial borrowings), and 3–5 year FCNR(B) deposits. Separately, the government has relaxed taxation rules for FPIs (foreign portfolio investors) investing in G-Secs (government securities), 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. End
Compiled by Meera Nair
Filed by Rajeev Pai
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