RBI holds repo rate at 5.25%, announces measures to boost forex inflows and reserves

📌 Summary:

• RBI's Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.25% and retained its stance, citing global supply-side inflation pressures rather than domestic demand overheating
• The Governor announced a package of measures to attract foreign capital and strengthen forex reserves: (1) Full hedging support to authorised dealer banks for mobilising 3–5 year FCNR(B) deposits (2) Concessional forex swap facility to incentivise External Commercial Borrowings (ECBs) by PSUs (3) Under the Fully Accessible Route (FAR), expanding 'specified securities' to include all new 15-, 30- and 40-year G-secs (4) Removal of short-term investment, concentration and individual-security limits on FPI investment under the General Route
• Rupee appreciated 50 paise to 95.24/USD after the policy, as liberalised FPI norms in G-secs boosted sentiment
• RBI asserted that India's forex reserves provide a sufficient buffer against external shocks
• Some analysts (Kotak) expect a 50 bps rate hike beginning October 2026 given amplified inflation risks

🎯 UPSC Relevance: GS3 (Indian Economy) — monetary policy, inflation management, capital account/forex management and external-sector resilience; illustrates use of non-rate tools (FCNR(B), FAR, FPI norms) to manage the rupee.

📝 Prelims Facts:

• Repo rate held at 5.25%; stance unchanged
• FCNR(B) = Foreign Currency Non-Resident (Bank) deposits, 3–5 year tenor
• FAR = Fully Accessible Route for FPI investment in specified G-secs
• New FAR-eligible G-secs: 15-, 30- and 40-year tenors
• Rupee post-policy: 95.24 against US dollar (up 50 paise)

🔑 Key Term: Fully Accessible Route (FAR) — a channel introduced by RBI allowing non-residents unrestricted investment in designated government securities, aiding inclusion of Indian bonds in global bond indices.