The RBI held the repo rate at 5.25% and retained its neutral policy stance.
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The RBI held the repo rate at 5.25% and retained its neutral policy stance The substantive action lay in a coordinated package to support the rupee and balance of payments, following the limited success of April curbs on speculative trading. Short-term measures include concessional FX swaps for PSUs raising ECBs and full hedging-cost support for banks issuing fresh 3–5Y FCNR(B) deposits (both valid to Sep 30, 2026), plus restoration of the nine-month export-realization window. Durable measures widen the FAR basket to all fresh 15Y, 30Y and 40Y g-secs, remove short-term and concentration limits on FPI g-sec investment, and liberalize NRI/OCI/PROI equity access. The central bank trimmed its FY27 GDP growth forecast to 6.6% (from 6.9%) and raised FY27 CPI inflation projection to 5.1% (from 4.6%), citing Middle East conflict and monsoon risks. We believe inflation risks as understated—projecting FY27 CPI at 5.5% on the back of 3F supply shock - fuel, fertilizer and food - and expect the rate-hike cycle to begin from Oct-26, with cumulative 50–75 bps tightening before Mar-27. G-secs should find near-term respite from INR stabilization, but the 10Y yield is seen drifting towards 7.25–7.50% by Mar-27 amid looming fiscal risks and the anticipated turn in monetary policy cycle in India as well as the US.