RBI MPC June 2026 Highlights: Reserve Bank of India (RBI) on Friday kept the repo rate unchanged at 5.25%, choosing to maintain a cautious approach amid rising global uncertainties. The decision was widely expected by the market and comes after the central bank had already reduced rates by a cumulative 100 basis points during FY25-26.

The six-member Monetary Policy Committee (MPC) unanimously voted to keep interest rates unchanged. The committee also retained its "neutral" policy stance, indicating that future decisions will depend on how economic conditions evolve.

Why Did RBI Pause Rate Cuts?

Announcing the policy decision, RBI Governor Sanjay Malhotra said the global economic environment has become more challenging in recent months.

According to the Governor, geopolitical tensions, volatility in financial markets, and weakening business sentiment have increased uncertainty across the world. The ongoing conflict in West Asia and rising energy prices remain key concerns for policymakers.

RBI noted that demand for safe-haven assets has increased, creating additional pressure on global currency markets. It also observed that several major central banks are becoming more cautious and could lean towards tighter monetary policies if inflation risks rise further.

Inflation Outlook Turns Cautious

The RBI acknowledged that inflation is likely to rise in the coming months. While underlying inflation pressures remain manageable, the central bank has raised its FY27 inflation forecast to 5.1%, with core inflation projected at 4.7%.

Governor Malhotra said food inflation remains a key concern due to the possibility of a sub-normal monsoon and emerging El Niño conditions. He also noted that the impact of higher fuel prices is gradually becoming visible in the economy.

India's retail inflation, measured by the Consumer Price Index (CPI), stood at 3.48% in April 2026. The increase was largely driven by higher prices of gold, silver jewellery, and certain food items.

The RBI's quarterly inflation projections are:

• Q1 FY27: 4.2%

• Q2 FY27: 5.1%

• Q3 FY27: 5.9%

• Q4 FY27: 5.9%

The government has mandated the RBI to maintain inflation at 4%, with a tolerance band of 2% to 6%.

RBI Cuts FY27 Growth Forecast

Despite the resilience of the domestic economy, RBI has lowered its FY27 real GDP growth forecast to 6.6% from the earlier estimate of 6.9%.

According to the central bank, higher energy prices, supply disruptions, and rising input costs are beginning to weigh on economic activity. While manufacturing and services sectors continue to expand, some high-frequency indicators are showing signs of moderation.

The RBI's quarterly GDP growth projections are:

• Q1 FY27: 6.6%

• Q2 FY27: 6.3%

• Q3 FY27: 6.5%

• Q4 FY27: 6.8%

Governor Malhotra said India remains well-positioned to withstand external shocks, supported by resilient domestic demand and stable financial conditions.

RBI Announces Measures to Support Capital Inflows

RBI also announced a series of measures aimed at strengthening foreign capital inflows and deepening financial markets.

India's foreign exchange reserves stood at $682.3 billion in the week ended 28 May 2026 (RBI weekly statistical supplement), providing a strong buffer against external volatility.

To attract more investment, the central bank has liberalised foreign portfolio investment norms for government securities, expanded the Fully Accessible Route (FAR), and increased investment limits for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) in equity instruments.

RBI also removed certain short-term investment and concentration limits for foreign investors in government bonds. In addition, it reiterated its commitment to maintaining adequate liquidity in the banking system to support economic growth

Key Risks to Watch

While maintaining its growth outlook, the RBI highlighted several factors that could influence inflation and economic activity going forward.

These include:

• Rising geopolitical tensions and their impact on energy prices

• Volatility in global financial and currency markets

• A possible sub-normal southwest monsoon

• Changes in global monetary policy by major central banks

The RBI said both growth and inflation forecasts remain dependent on how these global developments unfold in the coming months.

Bottom Line

The RBI's decision to keep the repo rate unchanged at 5.25% reflects a wait-and-watch approach at a time of increasing global uncertainty. While inflation remains under control and domestic growth is holding up well, policymakers are choosing caution amid geopolitical tensions, energy price risks, and currency market volatility. Investors and borrowers will now closely watch upcoming inflation data and global developments for clues on the RBI's next move.

How Rate-Sensitive Markets Behaved in the Fortnight After the June Policy Hold

The Monetary Policy Committee voted unanimously on 5 June 2026 to keep the repo rate at 5.25% and retain a neutral stance. The Reserve Bank of India raised its FY27 CPI inflation projection to 5.1% from 4.6% and cut its FY27 GDP growth forecast to 6.6% from 6.9%. It also announced steps to attract foreign capital, including a concessional forex swap facility until 30 September and wider access for overseas investors in government bonds.

Market reaction on the day was mixed. The Nifty 50 closed at 23,366.70, down 0.21%, after early gains faded. Nifty Bank rose 0.35% to 54,496.25. Nifty Realty was up nearly 2% by late morning but closed 0.56% higher at 768.90, and Nifty Auto closed 0.08% higher at 26,165.95. The 10-year government bond yield eased to 6.96% after the announcement.

The next two weeks were volatile before recovering. The Nifty 50 dipped to 23,161.60 on 11 June, 0.88% below the policy-day close, then ended at 24,013.10 on 19 June, 2.77% higher. Over the same period Nifty Bank gained 5.85% to 57,685.75, Nifty Realty rose 5.59% to 811.90 after touching 743.35 on 11 June, and Nifty Auto added 1.60% to 26,583.35.