Key facts
- RBI maintained the benchmark policy repo rate at 5.25%.
- India's GDP growth forecast for the fiscal year was lowered to 6.6%.
- The inflation projection for the fiscal year ending March 2027 was raised to 5.1%.
- Measures to support the Indian Rupee include scrapping capital gains tax for foreign bondholders.
- The RBI maintained a 'neutral' monetary policy 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 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.