RBI Holds Repo at 5.25%, Hawkish Guidance; India Offers Tax Relief for FIIs
Key Questions
What decision did the RBI MPC make on interest rates?
The RBI held the repo rate at 5.25% with hawkish guidance, cutting GDP growth forecasts to 6.6% and raising inflation projections to 5.1%. A large RBI dividend of ₹2.87 lakh crore also bolstered the fiscal buffer.
What tax relief has India offered to foreign investors in bonds?
India scrapped capital gains and interest taxes on G-Secs for foreign bond investors effective April 1, 2026. This measure aims to counter rupee weakness and bond outflows while boosting FPI inflows.
What steps is India taking to defend the rupee amid forex pressures?
India is preparing a $100B RBI intervention package, possible rate hikes, and gold import restrictions. Forex reserves stand at $682.32B but have dropped $40B in a month, with the forward dollar book rising sharply.
RBI MPC held repo at 5.25% with hawkish guidance; GDP cut to 6.6%, inflation raised to 5.1%. RBI dividend ₹2.87L Cr boosts fiscal buffer. India announces tax relief on G-Secs: capital gains and interest tax scrapped for foreign bond investors effective April 1, 2026, countering rupee weakness and bond outflows. Rupee strengthened to 95.24 post policy. India prepares rescue package to prevent currency crisis: $100B RBI intervention, potential rate hikes, gold import restrictions. Forex reserves at $682.32B, but forward dollar book surged to $110-115B, with reserves dropping $40B in a month—quantifying the scale of defense and signaling higher hedging costs for clients. India's gold tariff hike backfires, smuggling could exceed 100 tons ($14.35B), squeezing banks and refiners—a live case study in unintended regulatory consequences. RBI's FCNR deposit move is a tactical response to rupee pressure and CAD, providing short-term relief. Structural FPI inflows into Indian bonds confirmed by recent surge in demand, improving financing conditions for India Inc.