The six-member Monetary Policy Committee (MPC) unanimously voted to keep the repo rate at 5.50% and maintain a neutral policy stance, highlighting the RBI’s commitment to fostering sustainable growth while keeping inflation in check.

RBI Governor Sanjay Malhotra noted that favorable macroeconomic conditions, including low inflation, have created room to support economic expansion. Consumer tax cuts announced by the government, alongside recent monetary measures, are expected to strengthen domestic demand and maintain price stability, providing a positive outlook for the coming months.

India’s economy continues to show remarkable resilience, with GDP growth for the current financial year revised upward to 6.8% from a previous estimate of 6.5%.

The April-June quarter recorded an impressive 7.8% year-on-year growth, reflecting robust domestic activity and strong demand across key sectors. Governor Malhotra emphasized that structural reforms and supportive fiscal measures are helping to counterbalance external challenges, including U.S. tariffs on certain exports.

Inflation remains well within the central bank’s target range, with projections for the year at a moderate 2.6%, down from the earlier estimate of 3.1%. Lower food prices and tax reductions have contributed to this favorable outlook, offering the RBI flexibility to respond proactively to evolving economic conditions. Analysts have described the RBI’s stance as dovish, signaling the possibility of measured rate cuts later in the year to further support growth.

In addition to maintaining rates, the RBI announced a range of measures to enhance lending and strengthen the international use of the rupee. Banks will enjoy greater flexibility to provide credit to large corporates, support acquisitions, and expand lending against listed securities. These steps are designed to promote investment, stimulate economic activity, and ensure a dynamic credit environment for businesses.

To encourage the rupee’s global acceptance, the central bank will allow domestic rupee balances to be invested in corporate bonds and enable lending in rupees to neighboring countries, including Nepal, Bhutan, and Sri Lanka.

Rules governing foreign currency borrowing for Indian firms will also be eased, creating additional avenues for growth and cross-border trade.

The RBI’s approach demonstrates a careful balance between fostering economic expansion, maintaining financial stability, and promoting innovation in financial markets. With strong growth momentum, moderate inflation, and supportive policy measures, India is well-positioned to navigate global challenges while sustaining long-term economic development.

By combining prudent monetary management with proactive reforms and a focus on credit and internationalization, the RBI is ensuring that India’s economy remains resilient, adaptive, and poised for continued success in the months ahead.

NDB, which has previously raised funds in Chinese yuan and South African rand, is in advanced stages of discussions with the Indian central bank for its debut rupee issuance, the sources said.

It will look to raise between $400 million and $500 million through 3-5 year bonds in the first tranche, one of the sources said.

The plan comes at a time when China and India are both pushing for greater international acceptance of their currencies and as investors are seeking to diversify their assets beyond developed markets.

Earlier this week, China rolled out measures to support the development of yuan bonds in Hong Kong and, over the past few months, the Indian central bank has announced steps to allow wider investment options for foreign funds held in Indian bank accounts.

Details of the bond issuance have not been previously reported. It could not be ascertained if NDB has appointed bankers to the issue.

A spokesperson for the Reserve Bank of India did not respond to a request for comment. The sources declined to be identified as they are not authorised to speak to the media.

“NDB is working with the government of India and regulators to explore raising funds in the local markets to provide local currency finance for Indian projects,” Monale Ratsoma, the bank’s Chief Financial Officer, said in response to Reuters queries. He declined to share details on the issuance.

Final approvals for the issue are pending with the Reserve Bank of India, two other sources familiar with the conversations said. It is not clear if all government approvals have been received.

An email sent to a government spokesperson was not immediately answered.

NDB had been planning to tap the Indian rupee bond market two years ago but two of the three sources said issuance was delayed as approvals from the government and central bank did not materialise then.

Five-year Strategy

Multilateral agencies such as the World Bank’s International Finance Corporation have previously issued rupee-denominated bonds in the overseas and local markets, drawing strong investor interest.

Established in 2015 by Brazil, Russia, India, China, and South Africa, the NDB has raised about a third of its $11 billion bond issues in local currencies, primarily the yuan and South African rand, with plans to expand into other member currencies.

NDB has targeted to provide 30% of its total financing commitments over the five-year strategy period in national currencies of member countries, the bank stated in its strategy report for 2022-26.

Issuing the bonds in the Indian market will add to the liquidity and diversity of the local bond market, said one of the sources quoted above. The onshore market has more depth and will help in better price discovery, this person added.

“The issue will draw interest from a segment of investors particularly those focused on emerging markets and interested in the de-dollarisation trend, said Vivek Rajpal, Asia strategist at investment advisory firm JB Drax Honore, adding that it can also be seen as a step in the direction of rupee internationalisation.