RBI Monetary Policy June 2026: RBI MPC meeting: Reserve Bank of India (RBI) governor Sanjay Malhotra on Friday, 5 June, kept the repo rate and monetary policy stance unchanged, citing heightened inflation risks arising from geopolitical tensions, while noting that the Indian economy continues to remain resilient and well-positioned despite global uncertainties.
The Monetary Policy Committee (MPC) of the decided to keep the repo rate unchanged at 5.25%, and maintain the policy stance as “neutral”. RBI Governor Sanjay Malhotra said the MPC unanimously voted to retain the policy repo rate at 5.25%.
“Disruptions to key trade routes and supply chains, increased market volatility and cautious sentiment. We remain confident to withstand these shocks with minimum pain,” Malhotra said.
“It is important to not only confront and address these challenges, but also to take this as an opportunity to further enhance our resilience,” he added.
5 key takeaways from June monetary policy decision
1. Repo Rate, Policy Stance Remain Unchanged
The RBI kept the repo rate and monetary policy stance unchanged for the third straight policy meeting in June. The central bank had also maintained the status quo in April after delivering a 25 basis point rate cut in December last year.
With the unchanged at 5.25%, the Standing Deposit Facility (SDF) rate — the rate at which banks park surplus funds with the RBI — remains at 5%. The Marginal Standing Facility (MSF) rate, which allows banks to borrow from the RBI during emergencies, also stays unchanged at 5.5%.
Explaining the MPC’s decision, Governor Sanjay Malhotra said the committee considered the uncertainty surrounding the duration and intensity of the ongoing West Asia conflict, its potential spillover effects on the global economy, and the timeline for the normalisation of supply chains.
Given these uncertainties, the MPC deemed it appropriate to await greater clarity on evolving developments and therefore decided to retain its neutral monetary policy stance, he added.
2. Inflation forecast
The for FY27 as against 4.6% projected earlier, citing higher prices of commercial LPG, base metals, plastics, rubber and other input components as key factors contributing to the upward pressure on prices.
For FY27, 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.
Commenting on the inflation outlook, RBI Governor Sanjay Malhotra noted that headline Consumer Price Index (CPI) inflation remained below the central bank’s 4% target, coming in at 3.4% in March and 3.5% in April.
“CPI inflation remains below the target, despite global shock, as the pass through to domestic prices has been limited, while the baseline projections point towards headline inflation firming up towards the upper tolerance level in Q3 this year,” Reserve Bank of India Governor Malhotra said.
3. GDP growth forecast
The 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%. Growth estimates for the third and fourth quarters have also been reduced to 6.5% and 6.8%, respectively, from the earlier projections of 7% and 7.2%.
“Over the past few months, the global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility and cautious business sentiment. Let me, at the very outset, emphasise that the Indian economy entered this episode of global turbulence with much better fundamentals than in previous similar episodes. We remain confident to withstand these shocks with minimum pain,” said RBI Governor Sanjay Malhotra.
4. NRI Investment Limits Raised
RBI Governor Sanjay Malhotra announced an increase in investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments traded on stock exchanges without requiring SEBI registration. The revised limits will apply to investments made through the stock market and are aimed at enhancing investment opportunities and participation by Indians living abroad and OCIs in Indian capital markets.
5. Foreign Capital Boost
The RBI announced a series of measures aimed at attracting foreign capital and supporting government borrowing. Under the Fully Accessible Route (FAR), the central bank expanded the universe of “specified securities” to include all new issuances of 15-year, 30-year and 40-year government securities. It also removed restrictions related to short-term investments, concentration limits and individual security exposure for foreign portfolio investors () investing through the General Route.
RBI Governor Sanjay Malhotra said these measures, coupled with the tax incentives announced by the government earlier in the day, are expected to encourage greater foreign participation in India’s debt market.
The government has exempted foreign institutional investors and the Bank for International Settlements from on income arising from interest earned on government securities and gains from their sale, transfer or exchange, subject to prescribed conditions and disclosures. The tax exemption will come into effect from April 1, 2026.
Additionally, the RBI will offer a concessional forex swap facility for around four months until September 30. The central bank will also incentivise external commercial borrowings by public sector undertakings and extend a similar facility to banks raising three-to-five-year FCNR(B) deposits, allowing them to bear the full hedging cost until September 30. Further, the RBI has restored the time limit for realisation of export proceeds to nine months.
Disclaimer: This story is for educational purposes only. Please consult with an investment advisor before making any investment decisions.