Reserve Bank of India holds rates at 5.25%, unveils measures to support falling rupee

The Reserve Bank of India’s Monetary Policy Committee held the policy repo rate steady at 5.25% on June 5, with a neutral stance.

The rate decision and what came with it

The standing deposit facility rate stays at 5%, while the marginal standing facility rate and bank rate remain at 5.5%.

The RBI introduced tax exemptions on interest income and capital gains for eligible foreign investors holding Indian government bonds. The central bank also enhanced dollar deposit schemes for non-resident Indians. Analysts estimate these measures could attract between $30 billion and $40 billion in external commercial borrowings and foreign debt inflows.

The rupee hit a record low of 96.86 against the US dollar on May 20.

Why rates stayed put despite inflation creeping higher

The RBI revised its inflation forecast for fiscal year 2027 upward from 4.6% to 5.1%. The MPC also slashed its GDP growth forecast from 6.9% to 6.6%.

The pressures are largely imported. Escalating conflict in Iran and West Asia has pushed oil prices higher, and India imports roughly 85% of its crude oil needs. Supply chain disruptions from the same geopolitical tensions have compounded the problem. Foreign investors have been pulling capital out of Indian markets.

Following the announcement, the rupee showed signs of strengthening, and bond yields eased slightly.

What this means for investors and crypto markets

For crypto investors, a stabilizing rupee reduces the urgency for Indian retail investors to seek dollar-denominated hedges, which has historically included Bitcoin and stablecoins.

The revised GDP growth forecast of 6.6% represents a downward revision from 6.9%. The $30 billion to $40 billion foreign inflow estimate is worth monitoring carefully. If actual capital flows come in well below that range, markets will quickly reprice the effectiveness of the RBI’s strategy, and the rupee could resume its slide toward new lows beyond the 96.86 record set in May.

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