RBI Maintains Repo Rate at 5.25%, Highlights Key Takeaways from June MPC Meeting

Reserve Bank of India Keeps Repo Rate Unchanged Amid Geopolitical Tensions

The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) meeting on Friday, 5 June, maintained the policy stance as "neutral" and kept the repo rate unchanged at 5.25%. RBI Governor Sanjay Malhotra cited heightened inflation risks arising from geopolitical tensions, global uncertainties, and disruptions to key trade routes and supply chains.

The central bank's decision to keep the repo rate and monetary policy stance unchanged for the third straight policy meeting in June reflects the RBI's cautious approach to addressing the challenges posed by the ongoing West Asia conflict. The MPC considered the uncertainty surrounding the duration and intensity of the conflict, its potential spillover effects on the global economy, and the timeline for the normalisation of supply chains.

Key Highlights from the RBI's June Monetary Policy Decision

Read also: RBI Considers Introduction of Polymer Currency Notes

• Repo Rate: 5.25%
• Standing Deposit Facility (SDF) rate: 5%
• Marginal Standing Facility (MSF) rate: 5.5%
• Inflation forecast: 5.1% for FY27
• GDP growth forecast: 6.6% for FY27
• NRI investment limits raised for equity instruments traded on stock exchanges
• FPI norms eased for participation in government securities

The RBI projected India's inflation at 5.1% for FY27, citing higher prices of commercial LPG, base metals, plastics, rubber, and other input components as key factors contributing to the upward pressure on prices. The MPC expects inflation to remain elevated through the year, projecting CPI inflation at 4.2% in the first quarter, 5.1% in the second quarter, 5.9% in the third quarter, and 5.9% in the fourth quarter.

The RBI also lowered its FY27 real GDP growth forecast to 6.6% from the earlier estimate of 6.9%, reflecting a more cautious outlook on economic activity. The central bank now expects growth of 6.6% in the first quarter, down from the earlier projection of 6.8%, while the forecast for the second quarter has been revised to 6.3% from 6.7%.

In a move to enhance investment opportunities and participation by Indians living abroad and Overseas Citizens of India (OCIs) in Indian capital markets, RBI Governor Sanjay Malhotra announced an increase in investment limits for Non-Resident Indians (NRIs) and OCIs in equity instruments traded on stock exchanges without requiring SEBI registration.

Read also: Study Finds Earth's Building Blocks Originated from Inner Solar System

The RBI also eased norms for foreign portfolio investor (FPI) participation in government securities, exempting interest on government securities from tax for FIIs and expanding the universe of specified securities by including all new issuances of 15-year, 30-year, and 40-year government bonds (G-secs).