The Reserve Bank of India kept the repo rate unchanged at 5.25% and retained a neutral stance, citing a favourable macroeconomic environment. With inflation projected at 2.1% for FY26 and GDP growth expected at 7.4%, the central bank opted for a cautious pause to allow the impact of earlier rate cuts to transmit fully. The decision ensures stability in borrowing costs and EMIs while preserving policy flexibility to respond to risks such as global uncertainty, crude oil volatility, and potential inflationary pressures.
Click to View MoreRising geopolitical tensions, policy uncertainty in the United States, and concerns over excessive reliance on the US dollar have accelerated the global trend of de-dollarisation, prompting central banks to diversify their foreign exchange reserves. A key outcome of this shift has been a strong surge in gold prices, as gold is seen as a safe, politically neutral store of value during times of financial and geopolitical instability. For India, the Reserve Bank of India has increased the share of gold in its reserves while gradually reducing exposure to dollar-denominated assets, strengthening the resilience and stability of the country’s external sector.
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Rupee depreciation refers to the fall in the value of the Indian rupee against other currencies, primarily driven by market forces such as high import demand, capital outflows, and global dollar strength. While it poses challenges like higher import costs, inflation, and increased foreign debt burden, it can also boost exports, attract foreign investment, and increase remittance value. Institutional interventions by the RBI, Government, SEBI, and export agencies aim to manage volatility, maintain investor confidence, and strengthen long-term economic fundamentals, ensuring that currency movements reflect real economic strength rather than short-term pressures.
Click to View MoreArtificial Intelligence is revolutionizing the Banking Sector by improving efficiency, security, and customer experience. However, challenges like high implementation costs, data privacy concerns, and skilled workforce shortages persist. The RBI emphasizes a balanced approach, including a robust regulatory framework and financial inclusion, to ensure successful AI adoption in banking.
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