RBI holds rates, cuts India GDP forecast, boosts rupee measures

Created at 5 Jun · 05:09 UTC18 sources↑ Market-relevant11 events

IN SHORT

The Reserve Bank of India kept its benchmark policy repo rate unchanged at 5.25% and maintained a neutral stance. It lowered its GDP growth forecast to 6.6% for the fiscal year and raised its inflation projection to 5.1% for the fiscal year ending March 2027. Measures to support the Indian Rupee include scrapping capital gains tax for foreign bondholders.

Key Numbers

5.25%benchmark interest rate

6.6%India GDP growth forecast for fiscal year

6.9%previous India GDP growth forecast

5.1%inflation projection for fiscal year ending March 2027

50 basis pointsinflation projection increase

7.6%expected GDP growth in the year ended March 31, 2026

4.7%expected core inflation

4.4%previous core inflation projection

4%India's inflation target

2-6%India's inflation tolerance band

0.35%rupee rise against the dollar

95.48rupee against the dollar

6.96%India's benchmark 10-year bond yield

0.2%benchmark equity indexes gain

5%rupee decline since Gulf conflict

20%tax on interest earned from investments

Key facts

RBI kept benchmark interest rates unchanged at 5.25%.

RBI lowered India's GDP growth forecast to 6.6% for the fiscal year.

RBI raised its inflation projection to 5.1% for the fiscal year ending March 2027.

RBI introduced measures to support the Indian Rupee, including scrapping capital gains tax for foreign holders of government bonds.

The RBI's monetary policy committee decided to continue with its "neutral" stance.

The Reserve Bank of India (RBI) maintained its benchmark policy repo rate at 5.25% and adopted a "neutral" monetary policy stance. The decision was made unanimously by the monetary policy committee, which noted a deterioration in the global environment and decided it was prudent to wait for greater clarity. The RBI lowered its GDP growth forecast for the current financial year to 6.6% from 6.9%, while raising its average retail inflation projection to 5.1% from 4.6% for the fiscal year ending March 2027. To support the Indian Rupee, which has fallen nearly 5% to historic lows due to crude oil price surges and foreign fund outflows, the RBI announced several measures. These include scrapping capital gains tax for foreign holders of government bonds, sweetening dollar deposit schemes for non-resident Indians, and subsidising hedging costs for offshore borrowing. The central bank expects inflation to remain within its tolerance band, providing headroom for holding interest rates steady. The RBI also announced measures to support the rupee, including scrapping capital gains tax for foreign holders of government bonds, sweetening dollar deposit schemes for non-resident Indians, and subsidising hedging costs for offshore borrowing. The government will scrap capital gains tax for foreign investors and remove the 20% tax on interest earned from such investments, effective April 1, 2026. The RBI will offer concessional forex swaps until September 30 to encourage state-owned firms to tap dollar borrowings and compensate banks for hedging costs on 3-year and 5-year foreign currency non-resident deposits.

RBI holds rates, cuts India GDP forecast, boosts rupee measures

PiQ Daily

RBI holds rates, cuts India GDP forecast, boosts rupee measures

PiQ Daily

Key facts

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