The Reserve Bank of India is expected to raise its key interest rates for the sixth time this year in a bid to cool inflation, which will possibly attract more investment into the nation. The central bank is slated to announce its rate decision on Tuesday.
The repo rate, the rate at which the central bank lends, is likely to be hiked by 25 basis points to 6.25% and the reverse repo rate, the rate at which the central bank borrows from banks, to 5.25% from 5%. RBI's last move was in September when it lifted the repo rate by a quarter point and the reverse repo by 50 basis points.
No change in seen in the cash reserve ratio, which determines the amount of funds that banks are required to set aside with the central bank.
India's inflation is stubbornly high. Annual inflation as measured by the wholesale price index rose to 8.62% in September from 8.51% in the previous month.
Although headline inflation started to soften from its double digit, elevated inflation remains a challenge for monetary policy, RBI said in a quarterly report released today. With respect to economic growth, the central bank said the current data on indicators of economic performance are consistent with 8.5% growth estimated in July.
The overnight cash rates had risen to its highest level in two years on October 29 after funds from banks were diverted to subscribe the shares of the government-owned Coal India Ltd.
In order to ease liquidity conditions, RBI permitted commercial banks to avail funds up to 1% of their deposits. The central bank will hold additional money market auctions this week.
Finance Secretary Ashok Chawla said today that liquidity easing steps of the central bank are not related to the monetary policy. He said inflation remains a major concern.
Data released by Markit Economics today showed an improvement in the Indian manufacturing sector growth. Manufacturers recorded a substantial increase in new order volumes in October. Reflective of the sustained increase in new orders, output expanded sharply from the previous month, survey results revealed.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.