RBI keeps repo rate unchanged at 5.25%, announces forex measures to attract dollars

Reserve Bank of India (RBI) Governor Sanjay Malhotra – Photo Credit:
KUNAL PATIL

Due to upward inflation pressures and downward growth concerns linked to the West Asia conflict, the RBI’s monetary policy committee decided to hold the repo rate steady at 5.25 % during its three‑day session that ended today.

To draw in more dollar inflows, the RBI unveiled several steps, such as broadening the list of eligible securities under the Fully Accessible Route (FAR) and encouraging public sector units to raise external commercial borrowings for a temporary window.

RBI Governor Sanjay Malhotra noted that the incomplete transmission of energy and other input‑cost changes has heightened inflation and growth risks.

He warned that rising inflation may erode household purchasing power, while the policy stance remains neutral.

Sources of risk for inflation and growth include surging global fuel and commodity prices, supply‑chain bottlenecks, financial‑market turbulence, weather‑related shocks, and a weakening rupee.

Accordingly, the RBI lifted its retail inflation forecast and trimmed its GDP growth outlook.

During its second FY27 meeting, the MPC kept the repo rate unchanged at 5.25 %, recalling the last reduction in December 2025 from 5.5 % to 5.25 %. This marks the third consecutive hold—in February, April and June 2026.

The RBI cut its FY27 real GDP estimate to 6.6 % (down from the earlier 6.9 %) and raised the CPI‑based inflation projection to 5.1 % (up from the previous 4.6 %).

Malhotra pointed out that prolonged supply‑chain disruptions and higher energy prices are showing up as slower growth and higher inflation forecasts compared with the April policy.

He said, “Significant risks cloud the MPC’s baseline view of inflation and growth, stemming from uncertainty over how long and how intense the conflict will be, the scale of its spill‑over effects, and how quickly supply chains can be rebuilt.”

The food outlook is also uncertain because of a forecast for a below‑average southwest monsoon and the influence of El Niño.

The Governor added, “While inflation risks have risen, the MPC judged it wise to await more clarity before acting, and therefore voted to hold the policy rate steady.”

He continued, “At the same time, the MPC will stay data‑driven, watching closely for any supply‑side pressures that could become entrenched in overall prices and inflation expectations, and will maintain its neutral stance.”

Published on June 5, 2026