The Reserve Bank of India’s June 2025 MPC press conference revealed important insights on inflation, capital flows, and the rupee. Governor Sanjay Malhotra addressed a wide range of questions from leading financial journalists. The session covered everything from FCNR deposits to polymer banknotes.
RBI MPC Press Conference: Inflation and Rate Outlook
Governor Malhotra firmly stated that the 4% inflation target remains sacrosanct. However, he stressed it is a medium-term goal — not a trigger for hasty action on small deviations. The RBI raised its CPI inflation forecast by 50 basis points to 5.1%, largely due to higher crude oil assumptions of USD 95 per barrel. Meanwhile, the Governor urged caution before drawing conclusions about an imminent rate hike.
He acknowledged that inflation could rise if supply shocks persist. Therefore, the RBI will closely monitor whether price pressures become generalised or build into expectations. As a result, the central bank remains data-dependent and will act policy by policy.
Key Details on Capital Flows and the Rupee
The RBI announced measures to boost capital inflows, including a concessional forex swap window for ECBs of PSUs and hedging cost support for FCNR (B) deposits. Additionally, the central bank expects healthy flows from NRI schemes and equity-related measures. No specific inflow target was set, but officials expressed strong confidence.
On the rupee, Governor Malhotra clarified he never called it undervalued — though some REER-based metrics suggest it may be. The RBI will intervene only to curb excessive volatility or speculative behaviour. Furthermore, no restrictions on capital outflows, such as limits on the Liberalised Remittance Scheme, are currently under consideration.
Deputy Governor Dr Poonam Gupta added that gross FDI touched USD 95 billion in FY2025-26. She projected further growth, potentially exceeding USD 110–120 billion this year.
Other Highlights From the Press Conference
Governor Malhotra confirmed that polymer banknotes are under preliminary consideration, but no decision has been made yet. On ATM cash shortages, he assured the public that sufficient currency exists and supplies will be replenished promptly. Additionally, Deputy Governor Swaminathan J noted that India will gain select access to advanced AI tools, with the RBI already issuing cyber security advisories to regulated entities.
Overall, the RBI projected a much stronger Balance of Payments for FY2025-26. India’s forex reserves cover roughly 11 months of imports, providing a solid buffer against external shocks.
Source: RBI Speeches
