RBI Announces Series Of Measures To Attract Dollar Inflows While Maintaining Status Quo On Rates

The Reserve Bank of India (RBI) on June 5, 2026 kept its benchmark repo rate unchanged at 5.25 per cent, choosing to prioritise economic growth. However, it introduced a series of measures aimed at stabilising the rupee, which has come under pressure from rising oil prices and persistent foreign capital outflows.

The six-member Monetary Policy Committee (MPC) unanimously voted to maintain the policy rate and retained its “neutral” stance, signalling that future decisions will depend on incoming economic data and evolving global conditions. RBI Governor Sanjay Malhotra said policymakers preferred to wait for greater clarity on inflation risks before considering any change in interest rates.

India is facing a challenging external environment marked by elevated crude oil prices and continued uncertainty linked to the conflict in West Asia, which was highlighted by Malhotra in his speech. Since late February, the rupee has weakened nearly 5 per cent against the dollar, touching record lows amid heavy foreign fund outflows and concerns over a surge in India’s import bill.

Instead of raising rates to defend the currency, the RBI and the government announced several measures designed to attract dollar inflows. 

These include the removal of capital gains tax for foreign investors holding Indian government bonds and the elimination of the 20 per cent tax on interest earned from such investments. Along with this, enhanced incentives for non-resident Indians (NRIs) will also be offered to encourage dollar deposits with Indian banks. The RBI also introduced concessional foreign exchange swap facilities for public-sector banks.

After the announcements, the rupee strengthened around 0.60 per cent, gaining 85 paisa during the session to close below the 95 against the dollar mark. 

Meanwhile, India’s benchmark 10-year government bond yield declined to 6.98 per cent. Conversely, banking stocks also gained, with the Nifty Bank index rising 0.4 per cent as investors welcomed the RBI’s efforts to support the currency without increasing borrowing costs.

The RBI’s latest move underscores its preference for using targeted liquidity and capital-flow measures to support the rupee rather than relying on higher interest rates, while keeping a close watch on inflation and global developments. The RBI revised its economic projections to reflect the more difficult global backdrop. The central bank raised its inflation forecast for the current financial year to 5.10 per cent from 4.60 per cent, citing risks from higher energy prices and supply-side disruptions. It also lowered its gross domestic product (GDP) growth estimate to 6.60 per cent from 6.90 per cent.

Economists said the decision reflects a delicate balancing act. While inflation remains within the RBI’s 2-6 per cent target range, the central bank is wary of tightening policy too soon and hurting growth. However, several analysts believe that if inflationary pressures persist or the rupee remains under strain, rate hikes could return to the agenda later this year.