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Informist, Friday, Jun. 5, 2026

MUMBAI – Following is a compilation of first views of economists and market experts on the Reserve Bank of India's second bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Friday:

BANKERS

SHAILENDRA JHINGAN, HEAD OF TREASURY AND ECONOMIC RESEARCH, ICICI BANK

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The RBI unveiled a bazooka of measures today. With capital inflows incentivised, the RBI has effectively anchored the exchange rate. This will give importers some comfort and likely lead to increased hedging activity from exporters.

We expect the rupee to appreciate even past 94 a dollar as these measures come into effect. The RBI is likely to allow the positive impact to play through rather than sterilising it by materially reducing its forward book. Market intervention may reduce.

The removal of the withholding tax enhances returns for foreign portfolio investors, which could lead to some inflows into bonds. The tax changes and increase in FAR (Fully Accessible Route) bonds show better access for foreign investors and make a stronger case for the inclusion (of India's bonds) on Bloomberg's Global Aggregate.

(Aaryan Khanna)

PRALAY MONDAL, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, CSB BANK

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The policy has taken a balanced approach of maintaining liquidity and growth along with keeping a watch on inflation. The shortage of dollar liquidity in the system has been addressed by a multi-pronged approach of increasing limits and reducing the cost burden on market players and FPIs. This should yield positive results in terms of inflows in the medium term.  End

(Nandini Sinha)

V.R.C. REDDY, HEAD OF TREASURY, KARUR VYSYA BANK LTD.

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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 durable 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 (foreign exchange) measures and improving liquidity conditions.

(Meera Nair)

ECONOMISTS

INDRANIL PAN, CHIEF ECONOMIST, YES BANK

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This policy was more about addressing the paucity of foreign flows into the Indian economy and addressing the external sector problems rather than addressing the growth-inflation dynamics. The critical measures to boost FPI investments into the G-sec (government securities) markets include tax measures such as withdrawal of withholding tax and the LTCG (long-term capital gains) tax. Banks are allowed to raise FCNR(B) deposits of 3– to 5-year maturity with RBI bearing the full hedging cost. Banks are also allowed to raise ECBs (external commercial borrowings) with a concessional forex (foreign exchange) swap. While it is difficult to pin down the exact nature of inflows, $35 billion-$45 billion may be a decent estimate, almost enough to close the gap for the anticipated BoP (balance of payments) for FY27. The policy challenge is to address falling growth and rising inflation. RBI, with its pause today, has bought itself more time to understand the growth-inflation dynamics and probably did not want to immediately react with a rate hike to match its higher inflation forecasts. Having said that, all policy options remain open as the RBI assesses the risks to inflation trajectory alongside the second-round impact via inflation expectation surveys, before deciding on rate hikes.

(J. Navya Sruthi)

GAURAV KAPUR, CHIEF ECONOMIST, INDUSIND BANK

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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 be 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 on 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 (foreign portfolio investor) debt investments, will help stabilise the exchange rate by attracting capital and shoring up forex reserves. 

(Meera Nair)

ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD.

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The MPC expectedly left the repo rate unchanged while expressing abundant caution regarding India's evolving inflation growth outcomes. In our view, the evolution of the monsoon rains, its impact on agri output and inflation, as well as any emerging sign of generalisation of inflationary pressures would drive the timing of the next rate action. As of now, we cannot rule out a rate hike in Q3 FY2027 (Oct-Dec). 

(Nandini Sinha)

ANINDYA BANERJEE, HEAD OF COMMODITY AND CURRENCY RESEARCH, KOTAK SECURITIES

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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.

(Nandini Sinha)

SHILAN SHAH, DEPUTY CHIEF EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS

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The Reserve Bank of India kept the repo rate unchanged at 5.25% Friday as it continues to "closely monitor developments" in West Asia. But we think it is only a matter of time before it begins a hiking cycle.

The Monetary Policy Committee unanimously voted to keep the repo rate unchanged at 5.25% and maintained its "neutral" stance. A majority of analysts had expected a hold; we were among the minority anticipating a 25 basis points hike Friday.

RBI Governor Sanjay Malhotra flagged downside risks to the growth outlook from the West Asia conflict, though he also stated that "domestic demand remains resilient". The bigger risk appears to be upside pressure on inflation. Admittedly, the headline CPI rate came in below the RBI's 4% target in April, which may have bought the Monetary Policy Committee time to delay tightening policy.

But since then, the government has bowed to the inevitable and started hiking fuel prices at the pump. Broader supply chain disruption is going to start pushing underlying inflation up too. Governor Malhotra noted that "generalisation of inflation through second-round effects on expectations and wages is a distinct possibility, warranting a close vigil".

The RBI is also having to contend with the depreciation of the rupee. Though it has had some respite in recent days, the rupee fell last week to a record low of 96.8 against the dollar. We had suggested some measures to support the currency could be announced today and that was duly the case, with foreign institutional investors no longer being subject to long-term capital gains tax on local sovereign bonds.

In all, this was very much a "wait-and-see" hold. But with inflation rising and pressure on the rupee likely to remain, we think the repo rate will be hiked by a cumulative 75 bps, taking it to 6.00% by the end of the year. 

(Shubham Rana)

AJIT MISHRA, SENIOR VICE-PRESIDENT OF RESEARCH AT RELIGARE BROKING LTD.

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The policy introduces decisive measures to attract foreign capital--scrapping capital gains tax for eligible foreign investors in government bonds, easing FPI access limits, and incentivising NRI dollar deposits while subsidising hedging costs. These steps, combined with concessional forex swaps, are aimed at reversing outflows and stabilising FX markets. For equities and debt markets, this is supportive of liquidity and inflows, while for the rupee, it signals a clear intent to anchor expectations and reduce volatility amid global oil shocks and sustained foreign selling pressure.

(Ruchira Kagita)

FUND MANAGERS

SNEHA PANDEY, FUND MANAGER - FIXED INCOME, QUANTUM MUTUAL FUND

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The RBI's June 2026 policy pause was entirely consistent with our expectations, underscoring its preference for administrative measures over rate hikes for currency management. Yet, in the run-up to this meeting, bond markets had priced in an aggressive pessimism, behaving as though the Monetary Policy Committee was already behind the curve — in our view, an overreaction.

Ahead of the announcement Friday, yields had already softened on the back of the government's tax proposals, and the measures unveiled drove a further 5–7 basis points decline in the 10-year benchmark. Crucially, the expansion of the Fully Accessible Route-bond base opens the door for foreign inflows across longer tenors, while domestic institutions such as banks, insurers, and pension funds remain underinvested. With the RBI likely to purchase close to INR 5 trillion of gilts via OMOs in the second half of FY27, the demand-supply dynamics for G-secs look materially improved.

Taken together, this backdrop suggests that policy tightening risks have receded, and the bond market is positioned for stability rather than stress — a constructive setup for investors navigating volatile times. 

(Priyasmita Dutta)

KAUSTUBH GUPTA, CHIEF INVESTMENT OFFICER, ADITYA BIRLA SUN LIFE AMC LTD.

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The Reserve Bank of India delivered a policy rooted in the Tinbergen principle, clearly separating instruments across objectives. While the Monetary Policy Committee 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 to include new 15-, 30-, and 40-year government securities, along with the removal of foreign portfolio 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 government securities, 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 non-resident Indians, overseas citizen of India 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.

(Meera Nair)

VIKAS GARG, HEAD OF FIXED INCOME, INVESCO MUTUAL FUND

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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.

(Meera Nair)

BASANT BAFNA, HEAD OF FIXED INCOME, MIRAE ASSET MUTUAL FUND

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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.

(Meera Nair)

DHAWAL DALAL, PRESIDENT AND CHIEF INVESTMENT OFFICER OF FIXED INCOME AT EDELWEISS MUTUAL FUND

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"Whatever it takes." That sentence pretty much sums up today's MPC policy's resolve which faced difficult terrain due to sharp uptick in crude oil prices and its 2nd round effect on the economy. While Repo Rate and stance have been kept unchanged at 5.25% and neutral for now, FY27 GDP growth is marked down to 6.6% and average CPI forecast is raised to 5.1%, with risk to the upside. At the same time, both GOI (government of India) and RBI have announced a number of measures to augment much needed capital inflows. This should have a net positive impact on India's FX (foreign exchange) reserves and investor sentiment in the medium term. That said, with average CPI expectations being raised, bond market investors will have to brace for a gradual increase in policy rates down the road, in our view.

(Nandini Sinha)

OTHERS

NIKHIL MADAN, MANAGING DIRECTOR, MAHIMA GROUP

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The Reserve Bank of India's decision to keep the repo rate unchanged at 5.25% but keep its stance "neutral" shows a balanced and pragmatic judgement in light of the uncertainties prevailing in the world. Though some inflation risks arising from high energy costs and supply chain issues continue to be a worry, the lack of volatility in interest rates is a welcome news for home buyers and builders alike.

The move is welcomed by the residential real estate industry, especially for Tier-2 cities, which will maintain affordability and keep the confidence of buyers. The desire of aspirational homebuyers for larger, better planned homes in emerging urban centres, backed by improved infrastructure and connectivity, is continuing to rise.

Demand in the luxury housing segment is also strong, as such buyers perceive luxury homes as an asset and a means of preserving wealth over time. With the stable rates coupled with high end-user demand, the picking up pace from the Tier-2 residential space and the luxury residential space is expected to continue in the coming times.

(Meera Nair)

VIPUL BHOWAR, SENIOR DIRECTOR, HEAD OF EQUITIES, WATERFIELD ADVISORS

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The RBI is adopting a defensive stance in response to global supply shocks. While hawkish rhetoric without an accompanying rate hike provides a temporary respite for equity markets, it does not constitute an unequivocal endorsement of investment, particularly in highly rate-sensitive sectors such as real estate, automotive, and consumer discretionary goods.

Should inflation necessitate a rate increase later this year, these sectors are likely to experience pressure on both margins and demand. For investors, the current strategy emphasises capital preservation by focusing on high-quality equities with strong pricing power. This cautious approach is designed to navigate the prevailing geopolitical uncertainties until conditions stabilise.

(Ashutosh Pati)

End

Compiled by Madhuri Pawar and Vinodini Yadav

Filed by Rajeev Pai

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