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Informist, Friday, Jun. 5, 2026

 

MUMBAI – Anindya Banerjee, head of commodity and currency research, Kotak Securities, said the following on the Reserve Bank of India's second bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Friday:

 

This policy is best read as a balance of payments package with a rate decision attached. By holding the repo rate at 5.25% with a "neutral" stance even while raising the 2026-27 (Apr-Mar) inflation forecast by 50 basis points to 5.1%, the Reserve Bank of India has drawn a clean line: the rate instrument is reserved for inflation, and the rupee will be defended through the capital account.

 

The expansion of the Fully Accessible Route to all new 15-, 30- and 40-year government securities issuances, the removal of foreign portfolio investors concentration limits, the extension of FCNR(B)(foreign currency non-resident bank) hedging support and the public sector unit external commercial borrowing swap window, and the restoration of the export realisation period to nine months together amount to the most comprehensive dollar-mobilisation effort since 2013. The Centre's simultaneous removal of taxes on foreign investment in G-Secs is the force multiplier, as it addresses the single biggest friction flagged by global bond funds and index providers.

 

We see this as constructive for the long end of the government securities curve. On the currency, these measures can aid the rupee's appreciation over the near term, provided oil prices stay below $100 a barrel. We see scope for the rupee to appreciate towards 94 per dollar to 94.5 per dollar on spot over the near term, with the upside in the pair now capped around the 96 per dollar mark. Any appreciation beyond 94 per dollar would depend on the actual quantum of dollar mobilisation through these newly announced routes and the trajectory of oil prices. With reserves at $682 billion, the RBI has ample ammunition to manage volatility while these flows gain traction.  End

 

Compiled by Nandini Sinha

Filed by Deepshikha Bhardwaj

 

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