RBI MPC Highlights: RBI holds repo rate at 5.25%, raises FY27 inflation projection by 50 bps to 5.1%

“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,” said Debopam Chaudhuri, Chief Economist, Piramal Group.

"The RBI’s decision to keep the repo rate unchanged at 5.25% is a positive development for both the economy and the real estate sector. At a time when global uncertainties continue to pose challenges, this move will help maintain market stability and reinforce consumer confidence. With borrowing costs remaining steady, homebuyers will not face any additional burden on home loan repayments, which should support housing demand, particularly in the mid-income and affordable housing segments. The decision also provides greater predictability for developers, enabling better financial planning and smoother execution of projects. As India continues to urbanise rapidly and the demand for quality housing grows, such policy measures play an important role in sustaining the momentum of the housing sector. We believe the RBI’s balanced approach will help support economic growth while keeping inflation under control, creating a conducive environment for long-term development," said Parveen Jain, President, NAREDCO. 

"The central bank ticked all boxes to spur dollar inflows and stabilise the currency, signaling that all hands are on deck. Announcements included widening the universe of eligible bond securities, discounted swap windows for FCNR B deposits, moves to boost concessional external commercial borrowings, amongst others. Separately, tax breaks in withholding (currently 20%) and capital gains for the debt investors. Benchmark rates were held unchanged, but the policy guidance was cautious on inflationary risks from the ongoing West Asia crisis and sub-normal southwest monsoon. Concern over inflation was reflected by 50 bps upward revision in the FY27 inflation projection, while the view on growth was tempered. The hawkish pause underscored the central bank’s resolve to contain inflationary expectations and defend the currency, while recognising that tighter policy rates have historically only had a limited impact on exchange-rate dynamics," said Radhika Rao, Senior Economist & Executive Director, DBS Bank. 

“Although inflation remains within the target range of plus/minus 4%, geopolitical risks affecting global supply-chain have increased dampening GDP growth prospects for FY2027 but Indian economy still remains resilient with strong domestic demand”, said Rajeev Juneja, President, PHDCCI.

Intensified global volatility has led to disruptions in energy supplies, higher commodity prices, and increased uncertainty across international financial markets. Despite these external challenges, the Indian economy continues to demonstrate resilience, supported by robust domestic consumption and healthy corporate and banking sector balance sheets, he added.

According to projections, India's real GDP growth is expected to moderate from an estimated 7.6 per cent in FY 2025-26 to 6.9 per cent in FY 2026-27 with Q1 at 6.8 per cent; Q2 at 6.7 per cent; Q3 at 7.0 per cent; and Q4 at 7.2 per cent.

While domestic demand remains supportive, high energy prices, logistics disruptions, and potential monsoon-related risks are expected to weigh on economic activity during the coming year.

"The RBI's decision to hold the repo rate at 5.25% reflects a clear recognition that today's inflation pressures are being driven primarily by global supply-side shocks rather than overheating domestic demand. With energy prices remaining volatile, higher interest rates would have done little to ease inflation while risking a slowdown in credit demand and consumption. For fintech lenders, rate stability is particularly important because it preserves affordability for everyday borrowers — salaried professionals, self-employed individuals and small businesses that are highly sensitive to changes in monthly repayment obligations. Across the ecosystem, we continue to see healthy demand for productive credit, but customers are also becoming more conscious of borrowing costs and financial discipline. The RBI's stance strikes an appropriate balance between protecting growth and maintaining vigilance on inflation. By avoiding a premature tightening cycle, it has provided households and businesses with greater certainty while retaining sufficient policy flexibility should global risks intensify," said Sarbvir Singh, Joint Group CEO, PB Fintech.

“The Reserve Bank of India kept the repo rate steady amid evolving global uncertainties to gauge its overall impact on the Indian economy before initiating any rate-hike cycle. This decision has provided some financial relief to the real estate sector, which continues to grapple with rising construction costs driven by elevated inflation. Developers and investors also continue to benefit from unchanged borrowing costs, helping sustain healthy demand-supply dynamics in the market. However, the central bank is likely to hike repo rate in the coming months to contain inflationary pressures stemming from rising fuel prices and the prospect of a weaker monsoon,” Shrinivas Rao, FRICS, CEO, Vestian said.

“The RBI’s decision to maintain a stable interest rate environment is a positive development for the real estate sector. For most homebuyers, especially end-users, the confidence to make a home purchase is closely linked to the predictability of borrowing costs. Stability in rates allows buyers to plan their finances better and make long-term decisions with greater certainty. Over the past few years, we have seen strong demand across key residential markets, driven by improving infrastructure, better connectivity, and evolving lifestyle aspirations. A stable monetary environment further supports this momentum by keeping housing affordable and sustaining buyer sentiment. We expect demand to remain healthy across both established and emerging residential corridors, as homeownership continues to be a priority for Indian families seeking long-term security and value,” said Ashok Singh Jaunapuria, MD and CEO, SS Group.

"The Reserve Bank of India’s MPC on June 5, 2026, unanimously kept the policy repo rate unchanged at 5.25% with a neutral stance. Governor Sanjay Malhotra highlighted the Indian economy’s strong and resilient fundamentals amid external challenges like West Asia tensions, elevated crude oil prices, supply disruptions, and rupee pressure. The central bank revised FY27 GDP growth projection downward to 6.6% (from ~6.9%) and raised CPI inflation forecast to around 5.1% with upside risks, while noting limited domestic pass-through so far. Malhotra emphasised a data-dependent approach, vigilance on inflation, monitoring of liquidity and rupee stability, and confidence in domestic consumption, services, agriculture, and MSMEs to withstand shocks with minimal pain. The government concurrently announced major tax relief for FIIs/FPIs in G-Secs, including scrapping capital gains tax (LTCG) and potentially removing/reducing the 20 per cent withholding tax on interest income, aimed at boosting foreign inflows, supporting rupee stability, and improving debt market liquidity," Santosh Meena, Head of Research at Swastika Investmart

Equity markets reacted with a mild positive relief rally as the widely expected rate hold removed uncertainty. Nifty 50 and Sensex rose modestly (around 0.2-0.4%) post-announcement, with support in rate-sensitive sectors like banking, NBFCs, real estate, and autos due to stable borrowing costs. The FII tax benefits added a positive catalyst for broader foreign sentiment and liquidity. Overall, the outcome supports a neutral-to-positive near-term outlook with range-bound trading, though volatility may persist based on global cues, inflation data, and Governor’s full commentary tone. Long-term, policy stability and tax measures could aid valuations if external risks are managed.

"Continuity and stability remain central to sustaining India’s growth momentum amid a dynamic global environment. For real estate, a stable repo-rate environment of 5.25% is constructive as it supports borrowing confidence, encourages long-term purchase decisions and enables disciplined investment across the value chain. While elevated energy prices and geopolitical developments warrant caution, the underlying fundamentals of Indian real estate remain strong. In Mumbai, for instance, demand for premium and aspirational housing continues to be driven by rising incomes, infrastructure led development, and long term confidence in the city's growth trajectory," said Navin Makhija, Managing Director, The Wadhwa Group.

“The RBI’s decision to keep the repo rate steady at 5.25% gives homebuyers all across a sense of stability amid a period of uncertainty, especially in the premium markets like MMR, NCR, and Pune. While borrowers may not see immediate relief in EMIs, the maintenance of stable borrowing costs helps buyers plan better and reinforces market confidence. At Tribeca, we believe that predictable financial conditions are essential for steady real estate growth, encouraging sustained demand and supporting the aspirations of new homeowners,” said Rajat Khandelwal, Group CEO, Tribeca Developers.

“The decision to maintain the repo rate reflects a measured approach towards balancing growth and inflation management amid a dynamic global environment. Policy stability plays an important role in strengthening business confidence and enabling long-term investment decisions across sectors. India continues to witness strong interest from global enterprises, GCCs, and high-growth businesses expanding their presence in the country. In this context, a stable macroeconomic environment provides occupiers with greater confidence to plan expansion strategies and invest in future-ready workplace solutions. We believe this will continue to support demand for quality commercial real estate and managed office solutions, as enterprises increasingly seek flexibility, operational efficiency, and speed-to-market while scaling across both established and emerging business hubs. As India’s innovation and GCC ecosystem continues to evolve, workspace providers will play an increasingly strategic role in enabling business growth and expansion,” said Umesh Uttamchandani, Managing Director, DevX for your consideration.

"This is a welcome move by the RBI, especially given the ongoing crisis in West Asia, which continues to put pressure on input costs across sectors. In such an environment, stability in interest rates is important for maintaining overall confidence in the market. A steady rate scenario helps in better financial planning and provides clarity for both businesses and homebuyers. When borrowing costs are stable, it becomes easier to plan investments, manage cash flows, and stay focused on execution," said Aman Sarin, Director & CEO, Anant Raj Limited.

"The decision to hold the repo rate steady offers a sense of continuity at a crucial time for the real estate sector. It reassures homebuyers by keeping borrowing costs stable and helps sustain demand momentum. For developers, it provides clarity for planning and execution. Going ahead, policy support and improved liquidity will be key to unlocking the sector’s full potential and ensuring steady, inclusive growth across markets," said Abhay Mishra, CEO & President, Jindal Realty.

The Reserve Bank of India (RBI) projected India’s Consumer Price Index (CPI) inflation outlook for FY2026–27 at 5.1 per cent, about 50 basis points more than earlier projected, after the conclusion of the Monetary Policy Committee (MPC) meeting, led by Governor Sanjay Malhotra. 

RBI Governor Sanjay Malhotra said that the real GDP growth is now projected at 6.6 per cent from the earlier 6.9 per cent. He also said that CPI inflation remains below the target despite global shock as the pass-through to domestic prices has been limited.

“The RBI’s decision to keep the repo rate steady at 5.25 per cent gives homebuyers all across a sense of stability amid a period of uncertainty, especially in the premium markets like MMR, NCR, and Pune. While borrowers may not see immediate relief in EMIs, the maintenance of stable borrowing costs helps buyers plan better and reinforces market confidence. At Tribeca, we believe that predictable financial conditions are essential for steady real estate growth, encouraging sustained demand and supporting the aspirations of new homeowners,” said Rajat Khandelwal, Group CEO, Tribeca Developers.

"The impact of supply shocks is expected to wane from Q4 onward. Underlying inflationary pressures remain benign at this point.Second-round effects of inflation remain a possibility. Domestic demand remains resilient," said RBI Governor.

RBI Governor said that the global economy remains clouded amidst unprecedented challenges. "We remain confident to withstand shocks with minimum pain amid heightened global uncertainties," RBI Governor Sanjay Malhotra added.

The Reserve Bank of India on Friday decided to keep policy rate unchanged at 5.25 per cent amid the West Asia turmoil the have pushed the crude oil prices higher, triggering risks of inflation. 

The RBI is currently navigating a complex macroeconomic environment, where it must carefully balance inflation management with the need to sustain growth momentum. While inflationary pressures warrant close monitoring, global uncertainties and evolving geopolitical developments continue to create challenges for economic activity. 

"In such a scenario, maintaining confidence across industries and supporting the broader growth trajectory remain equally important policy considerations. Given the prevailing volatility in the global environment, any further rate hike at this stage could weigh on industry sentiment, particularly across interest-sensitive sectors. In this context, we believe the RBI should maintain its growth-supportive stance. The ideal approach would be to keep rates unchanged to support economic activity. For the housing sector, lower borrowing costs are critical to sustaining homebuyer demand and enhancing affordability. A supportive rate environment would encourage home purchases, strengthen consumer confidence, and provide a positive impetus to the real estate sector, which has strong linkages with the broader economy," said Kunal Rishi, Chief Operating Officer, Krisumi Corporation.

With inflationary pressures continuing to be driven largely by supply-side factors such as fuel prices, input costs and currency movements, we expect the MPC to adopt a balanced approach in its upcoming policy decision. 

"For the housing sector, stability in interest rates remains important, as higher borrowing costs over the past few years have impacted affordability, particularly for first-time homebuyers in the affordable and mid-income segments. A stable policy environment, coupled with adequate liquidity, would support borrower confidence, improve credit flow and help sustain housing demand. We are also seeing increasing adoption of digital-first home financing solutions, making access to home loans more transparent, efficient and convenient for borrowers," said Atul Monga, CEO & Co-Founder, BASIC Home Loan.

"The steady interest rates and borrowing costs support sustained leasing momentum and long-term investment decisions, thereby increasing demand for office space and supporting new developments. This is particularly important at a time when leasing activity is gaining traction across key markets.  Easier credit availability attracts both individual and institutional investors, driving real estate growth. Hence, we expect a supportive stance to have a pronounced impact on the real estate sector, easing borrowing costs and improving credit availability. Overall, a stable interest rate environment offers much-needed predictability, supporting informed decision-making. As businesses increasingly adopt agile and cost-efficient workspace strategies, a supportive policy framework can further accelerate expansion plans and strengthen India’s evolving commercial real estate ecosystem," said Manas Mehrotra, Founder, 315Work Avenue, a leading coworking player

“With inflation slowly becoming stable and the repo rate staying at 5.25% by the RBI, the forthcoming MPC meeting will be extremely important as far as shaping market sentiments considering the current global and local situation. As of now, the current global uncertainty situation, crude oil price fluctuations, and external trade problems are creating risks for both inflation and the overall liquidity environment. On the other hand, it should be mentioned that RBI has noted that the country's economy is still resilient, and there is robust domestic demand in combination with positive banking and financial sector trends along with the rapid development of digital finance. These facts suggest that the policymakers will adopt a balanced approach," said Rohit Arora, CEO and Co-Founder, Biz2X and Biz2Credit.

"In the case of MSMEs, it is extremely important for business owners to have stable financing and policy conditions in order to manage cost pressures and keep on expanding and adopting new technologies. With any kind of positive signals from the RBI side, financial institutions will become more active in supporting their clients' financing requirements with increased credit growth and capital access for underserved borrowers due to innovative approaches such as AI-enabled lending and other digital innovations,” he added.

State Bank of India Chairman C S Setty said the economic growth process will stabilise if the RBI opts for a status quo in policy rates amid inflation challenges. He said market expectations broadly point towards a pause in rates.

A poll of economists and treasury heads showed that the Reserve Bank of India (RBI) is likely to keep the benchmark repo rate unchanged this time.