“Notably governor mentioned global central banks on hiking trajectory, serious upside risks to inflation from El-Nino, 2nd order impact, RBI will have to hike sooner than later. Overall, there is a lot of concerns, some action but the final rate hikes action is still awaited.”
FinTech BizNews Service
Mumbai, 5 June 2026: The Monetary Policy Committee (MPC) held its 61st meeting from June 3 to 5, 2026, under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. The MPC members Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Shri Indranil Bhattacharyya attended the meeting. After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC voted unanimously to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 5.25 per cent on 5 June 2026:
Here are the leading Economists’ views on the RBI MPC’s decisions, announced today:
Ms. Anitha Rangan, Chief Economist, RBL Bank:
In line with market consensus but contrary to our expectations of rate hike, RBI has kept policy rate unchanged. However RBI has revised its inflation upwards to 5.1% from 4.6% in FY27 while growth was revised upwards downwards to 6.6% from 6.9%. The key announcements were the host of measures to raise capital flows which includes removal of capital gains tax on bond securities for FPIs, expanding the base of FAR securities, swap concessions for FCNR(B) bonds among, concessional swap for ECBs and re-setting the export inflows time to 9m from 15m.
While the measures are a positive to attract flows, unless followed by rate hike, the effectiveness will be limited. Notably governor mentioned global central banks on hiking trajectory, serious upside risks to inflation from El-Nino, 2nd order impact, RBI will have to hike sooner than later. Overall, there is a lot of concerns, some action but the final rate hikes action is still awaited. We continue to pencil in 100 bp of hike and faster hike may be needed from August policy onwards.
Indranil Pan, Chief Economist, YES BANK:
“This policy was more about addressing the paucity of foreign flows into the Indian economy and addressing the external sector problems, rather than to addressing the growth-inflation dynamics. The critical measures to boost FPI investments into the G-sec markets include tax measures such as withdrawal of withholding tax and the LTCG taxes. Banks are allowed to raise FCNR (B) deposits of 3–5-year maturity with RBI bearing the full hedging cost. Banks are also allowed to raise ECBs with a concessional forex swap. While it is difficult to exactly pin down the exact nature of inflows, USD 35-45 bn may be a decent estimate, almost enough to close the gap for the anticipated BoP for FY27. The policy challenge is to address falling growth and rising inflation. RBI, with its pause today has bought itself more time to understand the growth-inflation dynamics and probably did not want to immediately react with a rate hike to match its higher inflation forecasts. Having said that, all policy options remain open as the RBI assesses the risks to inflation trajectory alongside the second-round impact via inflation expectations surveys, before deciding on rate hikes.”
Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India:
"The MPC pause on the rate and no change in stance is as per our expectations. A rate action was not warranted given that inflation is still within the targeted range. The RBI has lowered the growth projections and increased the inflation projections. These are understandable, but the important point is that the Governor has flagged significant downside risks to the 6.6% growth rate and 4.7% inflation projections. Clearly, the RBI is signalling that there are strong headwinds and is possibly landing the message in tranches that, in the event the Middle East conflict drags on, there would be a significant downside to growth. The inflation projection of 5.9% in Q3 is very close to the upper limit of 6% of the target band. If the inflation prints come in close to these projections and the upward risks continue, then the MPC could change its stance in the next meeting and press the rate increase button in its December meeting.”
Gaurav Kapur, Chief Economist, IndusInd Bank:
"The decision to maintain status quo on the Repo rate and to continue with the Neutral stance is as expected. The 50-bps upward revision in the baseline CPI inflation forecast with risks seen on the upside, have strengthened the case of rate hike in the next meeting. Real repo rate based on the revised inflation forecast is now well below the real neutral policy rate, indicating that monetary tightening will have to pursued in a calibrated manner going forward. That said, monetary policy will essentially respond to the passthrough of imported inflation to the headline CPI inflation without exerting undue pressure of growth. While supply side inflation pressures have increased, demand side pressures remain benign, especially if we consider core inflation excluding the precious metals inflation. Measures announced to boost capital inflows, along with government decision to exempt tax on FPI debt investments, will help stabilize the exchange rate by attracting capital and shoring up forex reserves."
Rumki Majumdar, Economist, Deloitte India:
We had anticipated the RBI to keep the repo rate unchanged at 5.25%, especially because higher oil and essential commodity prices amid middle east crisis have not yet reflected on the retail inflation. While the oil prices are showing up more clearly in WPI inflation (at 8.3%), CPI inflation remains at a comfortable 3.48%. The government absorbed the shock in global oil prices up until April and only recently, adjusted petrol and diesel prices. In fact, India has defended the increase in pump prices the longest and the pass through to consumers has been relatively modest compared with major economies such as China, Korea, the UK, and the US.
The RBI will remain watchful of the price movement in the coming months. By keeping the policy rates unchanged, it is preserving its monetary ‘armor’ to fight the inflation war as and when it happens. This is prudent because a premature rate hike could break the credit growth momentum that has lately been picking up. Bank credit rose 16.2% year-on-year to ₹211.8 lakh crore in the fortnight ended 15 May 2026, with retail credit up 16%, services credit up 18.6%, and industrial credit up 15.1%. This is important at a time when capital outflows and currency depreciation limit access to external sources of fund and makes external commercial borrowings expensive. The RBI has prioritized supportive domestic financial conditions for growth right now. Instead, the RBI probably will use a wider toolkit, such as liquidity operations, forex intervention and policy communication, to manage inflation and currency volatility.
The RBI’s downward revision of FY27 growth to 6.6% is broadly in line with our expectations as global uncertainties, higher energy prices, and weaker global demand weigh on growth. However, we remain slightly more positive than the central bank’s baseline and expect growth to be 6.7% because we expect the West Asia tensions to ease thereby reducing pressure on crude prices, trade routes and imported inflation. If that happens, domestic demand, services exports and reversal of capital flows should help India sustain growth closer to the upper end of current forecasts.
Debopam Chaudhuri, Chief Economist, Piramal Group:
“While the decision to keep policy rates unchanged and maintain a neutral stance was largely in line with expectations, the inflation outlook effectively serves as a signal of continued policy caution, or in a way precursor to hawkishness. With inflation projected to rise to 5.9% in Q3, it is unlikely that domestic borrowing costs for Indian corporates will revert to pre-Gulf crisis levels. Debt markets are expected to gradually incorporate this reality, resulting in a sequential increase in funding costs. In our view, the first policy rate hike could materialize by February 2027, marking the beginning of a formal rate-tightening cycle and eventually leading to higher borrowing costs even for EBLR-linked retail loans.
At the same time, the decision to expand foreign investor participation in longer-tenor government securities through the FAR route is a constructive measure. It not only has the potential to support foreign capital inflows and provide stability to the rupee, but also helps mitigate any crowding-out effects within private corporate borrowers arising from higher government borrowing requirements owing to the prevailing crisis.”
