What is the common examiner trap about Economy in UPSC exams?

They may swap the direction of the rate decision (hike vs. hold), confuse the tenors added under FAR (e.g., include 10-year instead of 15-year), or misattribute the entity (e.g., SEBI instead of RBI for these specific measures). They may also ask about the old vs. new export proceeds realization period (15 months vs. 9 months).

What should UPSC aspirants remember about Economy for Prelims?

1. Target this Data: Repo rate unchanged at 5.25% (for the second time). 2. Target this Nodal Body: The Monetary Policy Committee (MPC) of the RBI. 3. Target this Policy: Expansion of the Fully Accessible Route (FAR) to include 15-, 30-, and 40-year G-Secs.

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RBI Holds Repo Rate at 5.25%, Expands FAR to 15-40 Year G-Secs to Attract Foreign Capital

Q: The Monetary Policy Committee (MPC), which decides the repo rate, is a statutory body constituted under which Act?

The Reserve Bank of India Act, 1934, The Monetary Policy Committee (MPC) was constituted under Section 45ZB of the Reserve Bank of India Act, 1934, as amended in 2016. Its primary objective is to maintain price stability while keeping in mind the objective of growth.

Q: Consider the following statements regarding measures announced by the RBI: 1. It has decided to increase the investment limits for Non-Resident Indians (NRIs) in equity instruments without SEBI registration. 2. It has expanded the Fully Accessible Route (FAR) by including all new issuances of 10-year and 20-year tenor Government Securities. 3. It has proposed to reduce the time for realisation of export proceeds from 15 months to 6 months. Which of the statements given above is/are correct?

Only 1, Statement 1 is correct as per the article. Statement 2 is incorrect because the FAR was expanded to include 15-, 30-, and 40-year tenor G-Secs, not 10- and 20-year. Statement 3 is incorrect; the time was restored to nine months from 15 months, not reduced to six months.

Q: As per the recent RBI announcement, what is the repo rate that has been kept unchanged?

5.25%, The article explicitly states that the Monetary Policy Committee (MPC) of the RBI has decided to keep the repo rate unchanged at 5.25%. This is a precise data point frequently asked in prelims.

Q: What is the primary objective behind the RBI's decision to expand the universe of 'specified securities' under the Fully Accessible Route (FAR)?

To attract foreign capital for government borrowing., The article quotes RBI Governor Sanjay Malhotra stating that these measures, along with tax benefits, "should help attract foreign capital for government borrowing." The FAR is specifically designed to make Indian government bonds more accessible to foreign investors.

EconomyCORE

Target:UPSC GS-IIIMPSCBankingSSC GATeachingPrelims HighMains MediumStatic GK Link

05 Jun 2026

~2 min

Source: The Hindu

Key Data:Repo rate 5.25%FAR Tenors: 15, 30, 40 yearsConcessional swap till 30 Sep 2026Export proceeds: 9 months

Bodies:RBIMPCSEBI

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~2 min · Quick mode

What This Article Covers

1.RBI MPC holds repo rate steady at 5.25% for the second time in a row.

2.Expands Fully Accessible Route (FAR) to include all new issuances of 15-, 30-, and 40-year tenor Government Securities to attract foreign capital.

3.Increases investment limits for NRIs, OCIs, and all individual PROIs in equity instruments without SEBI registration.

The Big Picture

Prelims · HighMains · Medium

The RBI's Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.25% for the second consecutive time while announcing a suite of measures to boost foreign capital inflows. These include expanding the Fully Accessible Route (FAR) for G-Secs, increasing NRI/OCI investment limits, and providing concessional forex swaps. This is a strategic move to manage the balance of payments and support government borrowing.

Exam Lens

Quick Exam Facts From News

Repo Rate5.25% (Unchanged)

FAR Tenors Added15, 30, 40 years

Concessional Swap Till30 September 2026

Export Proceeds RealisationRestored to 9 months (from 15 months)

1-Minute Revision

›Repo Rate: 5.25% (Unchanged)
›FAR Tenors Added: 15, 30, 40 years
›Target this Data: Repo rate unchanged at 5.25% (for the second time).
›Target this Nodal Body: The Monetary Policy Committee (MPC) of the RBI.
›Target this Policy: Expansion of the Fully Accessible Route (FAR) to include 15-, 30-, and 40-year G-Secs.

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News Snapshot

🏦

Monetary Policy Stance

The RBI MPC has maintained the repo rate at 5.25%, signaling a pause in the rate hike cycle to assess economic conditions.

🌍

Capital Account Liberalization

Investment limits for NRIs, OCIs, and all individual Persons Resident Outside India (PROIs) in Indian equities have been increased, easing capital controls.

🔄

Forex Market Intervention Tools

RBI will provide concessional forex swaps for PSU ECBs and bear hedging costs for fresh FCNR(B) deposits to manage forex volatility and attract inflows.

Detailed Analysis & Strategic Depth

Context / Background

India's balance of payments faces pressure from global monetary tightening and capital outflows. The RBI's measures aim to bridge the current account deficit by attracting stable foreign investments, particularly in long-term government debt, which funds fiscal deficits. This follows the government's recent tax benefits aimed at similar inflows.

Core Analysis & Implications

Holding the repo rate provides stability to borrowers. Expanding the FAR makes long-term Indian bonds more accessible to foreign portfolio investors (FPIs), deepening the G-Sec market. Increasing NRI/PROI limits liberalizes the capital account, potentially bringing in dollar remittances. The concessional swap windows for PSUs and banks are targeted incentives to lower hedging costs and encourage foreign currency borrowing, directly supporting the forex reserves buffer.

Future Outlook / Way Forward

The RBI maintains a 'managed float' exchange rate policy, ready to curb excessive volatility. These measures, coupled with government tax policies, are expected to strengthen external sector resilience. Future MPC decisions will hinge on domestic inflation trends and global financial conditions, with the central bank retaining a toolkit for further market interventions if needed.

Key Facts at a Glance

Repo Rate5.25% (Unchanged)

FAR Tenors Added15, 30, 40 years

Concessional Swap Till30 September 2026

Export Proceeds RealisationRestored to 9 months (from 15 months)

You've read the full analysis. Now test your understanding.

Practice exam-style questions based on this article.

Q1Static LinkageEasyUPSC, Banking, SSC

The Monetary Policy Committee (MPC), which decides the repo rate, is a statutory body constituted under which Act?

Q2Statement-basedHardUPSC, Banking

Consider the following statements regarding measures announced by the RBI:

1. It has decided to increase the investment limits for Non-Resident Indians (NRIs) in equity instruments without SEBI registration.

2. It has expanded the Fully Accessible Route (FAR) by including all new issuances of 10-year and 20-year tenor Government Securities.

3. It has proposed to reduce the time for realisation of export proceeds from 15 months to 6 months.

Which of the statements given above is/are correct?

Q3Data-centricMediumUPSC, Banking, SSC

As per the recent RBI announcement, what is the repo rate that has been kept unchanged?

Q4Application/ImpactMediumUPSC, Banking

What is the primary objective behind the RBI's decision to expand the universe of 'specified securities' under the Fully Accessible Route (FAR)?

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RBI Holds Repo Rate at 5.25%, Expands FAR to 15-40 Year G-Secs to Attract Foreign Capital

Exam Lens

Quick Exam Facts From News

1-Minute Revision

News Snapshot

Monetary Policy Stance

Capital Account Liberalization

Forex Market Intervention Tools

Detailed Analysis & Strategic Depth

Context / Background

Core Analysis & Implications

Future Outlook / Way Forward

Prelims Flashpoints

Key Facts at a Glance