RBI Holds Repo Rate at 5.25% and Eases Rules to Attract Foreign Capital

On June 5, 2024 the Reserve Bank of India (RBI) announced that the repo rate will remain unchanged at 5.25%, confirming a neutral stance by Governor Sanjay Malhotra. At the same time the RBI broadened the range of government securities available to foreign investors, removed short‑term investment caps for foreign portfolio investors, and lifted capital‑gains tax on government bond holdings for foreign institutional investors. Limits on equity‑market participation for non‑resident Indians and overseas citizens of India were also increased, and registration with the securities regulator is no longer required.

SBI Research estimates that these measures could bring up to $40 billion of capital inflows, helping the rupee appreciate to around 95.24 per USD after the announcement. The central bank also revised its FY 2026‑27 outlook, cutting the projected GDP growth to 6.6% from 6.9% and raising inflation expectations to 5.1% amid West‑Asia geopolitical risks and higher global energy prices. The package is intended to deepen foreign participation in India’s sovereign debt market, strengthen the payment‑balance and mitigate external vulnerabilities.