The Reserve Bank of India kept the repo rate unchanged at 5.25% and retained its neutral policy stance, citing rising global uncertainty, supply chain disruptions, elevated energy prices and inflation risks from the ongoing West Asia conflict. The RBI said India entered this period of turbulence with stronger fundamentals than in previous global shocks.
The RBI expects India’s economy to remain resilient despite external headwinds. It projected real GDP growth at 6.6% for FY27, with quarterly growth estimates of 6.6% in Q1, 6.3% in Q2, 6.5% in Q3 and 6.8% in Q4. Domestic consumption, investment, manufacturing and services activity continue to support growth, although higher energy costs are beginning to create pressure.
On inflation, the RBI noted that CPI inflation remained below target in March and April at 3.4% and 3.5%, respectively. However, rising crude oil prices, higher input costs and potential supply disruptions are expected to push inflation higher in coming months.
For FY27, the RBI projected CPI inflation at 5.1%, with quarterly estimates of 4.2% in Q1, 5.1% in Q2, 5.9% in Q3 and 5.4% in Q4. Core inflation is expected at 4.7%. Risks include elevated commodity prices, supply chain disruptions, weaker monsoon conditions and possible El Niño effects.
Liquidity conditions remain comfortable. The banking system recorded an average daily liquidity surplus of Rs 2.63 lakh crore since the April policy meeting. Credit from all sources grew 15.4% in FY26, while bank lending remained broad based and robust despite higher market funding costs.
The RBI said India’s external sector remains stable despite trade and tariff uncertainties. Foreign exchange reserves stood at US$682.3 billion as of May 29, 2026, equivalent to about 11 months of imports. Gross FDI inflows increased to US$57.7 billion in FY26 from US$1.0 billion a year earlier, although net FPI flows have remained weak.
To attract foreign capital, the RBI announced several measures. All new 15, 30 and 40 year government securities will be included under the Fully Accessible Route, while restrictions on short term FPI investments under the General Route will be removed. Limits for NRI and OCI investments in listed equity instruments without SEBI registration will also be increased and extended to all Persons Resident Outside India.
The RBI will provide a concessional forex swap facility until September 30, 2026 to encourage external commercial borrowings by public sector companies. A similar facility will be offered to banks raising fresh 3 to 5 year FCNR(B) deposits, and the time allowed for realization of export proceeds will be restored to nine months.
The central bank said it remains committed to maintaining orderly financial markets and will intervene if needed to curb excessive volatility. While global risks have increased, the RBI believes India’s macroeconomic fundamentals, banking system health and external buffers remain strong enough to withstand current challenges.
India Grants Tax Relief to Foreign Investors in Govt Bonds
India has exempted foreign institutional investors from capital gains tax on the sale, exchange, or transfer of government securities. Interest earned on eligible government securities has also been made tax-free for specified foreign investors.
The Income-tax (Amendment) Ordinance, 2026, signed by President Droupadi Murmu, amends Schedule IV of the Income-tax Act, 2025. The changes are effective from April 1, 2026. Earlier, foreign investors faced a 12.5% long-term capital gains tax on listed shares and bonds held for over 12 months and a 20% withholding tax on interest from government bonds.
BofA India Chief Economist Rahul Bajoria said the government’s decision to exempt FPIs from capital gains tax addresses a long-standing market demand. He noted that, along with several RBI measures, the move signals a strong policy push to attract foreign capital, support the rupee, and improve investor confidence. According to Bajoria, these steps are not just short-term measures but could provide lasting benefits to India’s financial markets over the coming years.
RBI Unveils FX Measures, Sees Strong Foreign Capital Inflows
Reserve Bank of India announced that new foreign exchange measures will be introduced soon, including exemptions from CRR and SLR requirements for foreign currency non resident term deposits. The RBI also raised the overseas portfolio investment limit for resident individuals in Indian listed companies to 24% from 10%.
Governor Sanjay Malhotra said the central bank remains focused on its long term inflation target and will stay vigilant if price pressures broaden. He added that the RBI is not currently restricting capital outflows but is prepared to act against speculative foreign exchange trading if needed.
The RBI expects healthy foreign inflows through external commercial borrowings, equities and government bonds following the latest measures. The central bank also said it will ensure smooth liquidity conditions and orderly movement in the rupee, while implementing new bank lending rules for proprietary trading.
BBW News Desk is the editorial team of BigBreakingWire, a digital newsroom focused on global finance, markets, geopolitics, trade policy, and macroeconomic developments.
Our editors monitor government decisions, central bank actions, international trade movements, corporate activity, and economic indicators to deliver fast, fact-based reporting for investors, professionals, and informed readers.
The BBW News Desk operates under the editorial standards of BigBreakingWire, prioritizing accuracy, verified information, and timely updates on major global developments.
