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RBI holds repo rate at 5.25%, rolls out measures to draw foreign capital and shield the rupee

· 5 min read·Source: The Economic Times
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The Reserve Bank of India's six-member Monetary Policy Committee, chaired by Governor Sanjay Malhotra, unanimously kept the policy repo rate unchanged at 5.25% at its June 2026 meeting and retained a neutral stance. Rather than raising rates to defend a weakening rupee, the central bank chose a package of measures to attract foreign capital inflows, including widening the pool of securities open to foreign investors and easing investment limits for NRIs. The RBI lowered its FY27 growth projection to 6.6% and raised its retail inflation forecast to 5.1%, citing escalating geopolitical tensions, elevated energy prices and global uncertainty. With the repo rate steady, the standing deposit facility (SDF) rate stands at 5%, while the marginal standing facility (MSF) rate and the Bank Rate are at 5.5%.

Key Facts & Details

8 points
  • 1
    The MPC voted unanimously to keep the repo rate unchanged at 5.25% and maintained a neutral policy stance.
  • 2
    Instead of a rate hike, the RBI announced measures to attract foreign capital and strengthen external buffers for the rupee.
  • 3
    FY27 GDP growth projection was lowered to 6.6% and the retail inflation forecast raised to 5.1%.
  • 4
    The standing deposit facility rate is 5%, while the MSF rate and Bank Rate are set at 5.5%.
  • 5
    Governor Sanjay Malhotra cited geopolitical risks, energy prices and supply-chain disruptions behind the cautious stance.

Deep Dive

  • +
    The decision signals that interest-rate hikes remain a last resort, with capital-flow measures preferred to manage rupee pressure.
  • +
    Analysts estimated the inflow measures could draw in additional foreign capital each month, easing pressure on the currency.
  • +
    A 'neutral' stance keeps the door open for the RBI to move rates in either direction at future meetings depending on inflation.
Q

Exam Focus

What is the current repo rate after the RBI's June 2026 policy, and what stance did the MPC maintain?

Related Topics

RBIMonetary PolicyRepo RateRupee

Exam Relevance & Angle

The repo rate decision and the RBI's policy stance are among the most heavily tested topics across banking and insurance exams, and the choice to use capital-flow tools over rate hikes is an examiner-favourite conceptual hook linking monetary policy to currency management.

Target Exams

SBI POSBI ClerkIBPS POIBPS ClerkIBPS RRB OfficerIBPS RRB AssistantRBI Grade BRBI AssistantNABARD Grade ASSC CGLSSC CHSLSSC CPORRB NTPCLIC AAONIACL AOUPSC CSEState PCS

Background & Context

The repo rate is the rate at which the RBI lends short-term funds to commercial banks against government securities, and it is the central bank's principal tool for controlling inflation and liquidity in the economy. Rate decisions are taken by the six-member Monetary Policy Committee, chaired by the RBI Governor, which meets roughly every two months and operates under a flexible inflation-targeting framework that mandates keeping retail (CPI) inflation at 4%, within a band of 2% to 6%. A 'neutral' stance means the committee is not pre-committed to either raising or cutting rates and will respond to incoming data. The repo rate anchors a corridor: the SDF sits below it as the floor for absorbing liquidity, while the MSF and Bank Rate sit above it.

Related GK Concepts

Must Know
Monetary Policy CommitteeRepo rateStanding Deposit FacilityFlexible inflation targetingNeutral stance

Test Yourself

1 / 2

At its June 2026 monetary policy review, the RBI kept the repo rate unchanged at which level?

Source

The Economic Times

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RBI holds repo rate at 5.25%, rolls out measures to draw foreign capital and shield the rupee — Current Affairs 2026-06-08