Mumbai: The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.25% while maintaining a neutral stance in its latest Monetary Policy Committee (MPC) meeting held from June 3 to June 5. The central bank’s decision comes amid rising global uncertainties, elevated crude oil prices and concerns over inflation.

The policy outcome was largely in line with market expectations, but the RBI’s commentary offered important insights into the future trajectory of interest rates, inflation and economic growth.

Repo rate unchanged at 5.25%

The MPC unanimously decided to keep the policy repo rate unchanged at 5.25%, signalling continuity in monetary policy. As a result, borrowing costs for consumers and businesses remain stable for now.

The Standing Deposit Facility (SDF) rate has been retained at 5.00%, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50%. This means home loan borrowers are unlikely to see any immediate changes in their EMIs unless banks revise lending rates independently.

Neutral stance retained

The RBI has continued with its neutral policy stance, giving it flexibility to respond to evolving economic conditions. A neutral stance allows the central bank to either raise or cut interest rates depending on how inflation and growth trends develop in the coming months.

This approach reflects the RBI’s cautious strategy amid a complex global and domestic economic environment.

Global risks remain a concern

The central bank highlighted growing risks from global factors, particularly elevated energy prices and supply chain disruptions. Geopolitical tensions, especially in West Asia, have added to uncertainty in global markets.

According to the RBI, these developments could have spillover effects on India’s economy, impacting inflation and overall growth.

Growth outlook remains strong

India’s economic growth remains resilient despite global headwinds. As per earlier estimates, the economy expanded by around 7.6% in FY26, supported by strong domestic consumption and investment activity.

Key sectors such as manufacturing and services have continued to perform well, contributing to the overall expansion. However, the RBI indicated that growth could moderate slightly in the current financial year.

GDP growth projected at 6.6% for FY27

The RBI has projected GDP growth at 6.6% for the financial year 2026-27. Quarterly projections stand at 6.6% in Q1, 6.3% in Q2, 6.5% in Q3 and 6.8% in Q4.

While the outlook remains positive, the central bank cautioned that risks from global volatility, supply disruptions and weather-related uncertainties could impact growth.

Experts believe the RBI is carefully balancing the need to support growth while keeping inflation under control.

Inflation risks on the rise

The RBI flagged increasing inflationary pressures, driven largely by rising crude oil prices and higher input costs across industries. Prices of key materials such as metals, chemicals and plastics have increased, which could lead to higher consumer prices.

Fuel prices have also risen since May, adding to inflation concerns. The central bank has projected CPI inflation at 5.1% for FY27, with core inflation at 4.7%.

Additionally, concerns over a weaker monsoon and possible El Nino conditions could impact food prices, further complicating the inflation outlook.

Measures to attract foreign investment

Alongside policy decisions, the RBI announced measures to encourage foreign investment in Indian markets. Investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in listed equities without SEBI registration have been increased.

This facility has also been extended to all individual Persons Resident Outside India (PROIs), making it easier for overseas investors to participate in Indian equity markets.

The move is expected to support capital inflows and strengthen the rupee over time.

Conclusion

The RBI’s latest MPC meeting underscores a cautious but balanced approach to managing India’s economy. While interest rates remain unchanged, rising inflation risks and global uncertainties continue to pose challenges.

Going forward, the central bank is likely to closely monitor incoming data on inflation, growth and global developments before taking any further policy action. For now, stability remains the key theme, with flexibility to respond to changing economic conditions.