The Reserve Bank of India (RBI) has reportedly kept the repo rate unchanged at 5.25% during its meeting on Friday, June 05, 2026. This marks the third consecutive meeting where the central bank has opted for a status quo on lending rates.
Signaling a continued pause in its monetary policy stance. RBI Governor Sanjay Malhotra cited rising global uncertainties, geopolitical tensions in West Asia, and a cautious approach to inflation as the primary reasons for this decision.
Key Economic Projections & Adjustments
- Inflation Forecast Hiked: The consumer price inflation (CPI) projection for FY27 was aggressively raised by 50 basis points to 5.1% (up from 4.6%). RBI Governor Sanjay Malhotra flagged that the Indian crude oil basket has averaged a steep $110 per barrel over the past two months due to the US-Iran war conflict in West Asia.
- GDP Growth Trimmed: The real GDP growth estimate for FY27 was downgraded to 6.6% from the previous 6.9% projection, factoring in global supply chain shocks, weak sentiment, and the risk of a weak monsoon.
- Policy Stance: The MPC unanimously retained its “neutral” stance, keeping all future policy options open. Market experts note the policy has a hawkish undercurrent, meaning the next rate move is more likely to be a hike than a cut if global energy prices stay elevated.
Forex and Market Inflow Shock Absorbers
To combat a 6% depreciation of the Indian Rupee this year and protect forex reserves, the RBI announced heavy capital inflow measures:
- NRI/OCI Equity Limits: Raised and streamlined investment limits for Non-Resident Indians and Overseas Citizens of India to buy listed Indian equities directly.
- FAR Universe Expanded: Brought all new 15-year, 30-year, and 40-year government bonds under the Fully Accessible Route (FAR) for foreign investors.
- Concessional Forex Swaps: Offered a concessional forex swap facility for Public Sector Undertakings (PSUs) tapping External Commercial Borrowings (ECBs) until September 30, 2026.
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Immediate Impact on Loans & EMIs
Because the benchmark repo rate stands frozen at 5.25%, retail borrowers will not see an immediate change in their monthly EMIs. Existing floating-rate home loans, car loans, and personal loans tied directly to the repo rate will hold steady for the time being. However, given the sharp rise in projected inflation, any hopes for a loan interest rate cut have been effectively pushed to late 2026 or early 2027.
By Jessica Sabharwal
