RBI Monetary Policy Committee holds repo rate at 5.25% for third consecutive meeting – 5 June 2026.
The MPC met from 3 to 5 June 2026 and unanimously held the policy repo rate at 5.25% with a neutral stance, its third consecutive hold. Governor Sanjay Malhotra cited the West Asia conflict driving crude above USD 100 per barrel as the primary constraint on easing, delivering a materially more cautious outlook than April, with both the GDP and inflation forecasts revised.
Key Takeaways:
- The repo rate remains at 5.25% under the LAF; SDF at 5.00%, MSF and Bank Rate at 5.50%. The cumulative 125 basis points of cuts delivered through 2025 remain in effect. Further easing requires a material improvement in the global inflation environment.
- FY 2026-27 GDP growth is revised down to 6.6% from 6.9% projected in April, reflecting elevated energy prices, supply-chain disruption, and monsoon uncertainty. CPI inflation is revised upward to 5.1% from 4.6%, driven by energy and commodity pass-through materially above the RBI’s 4% target.
- A significant FPI liberalisation package was announced alongside the rate decision: the Fully Accessible Route (FAR) is expanded to all new 15-, 30- and 40-year government securities; FPI investment and concentration limits under the General Route are entirely removed; and equity investment caps for NRIs and OCIs are increased, complemented by the removal of capital gains and withholding taxes on certain foreign government securities investments.
- India’s foreign exchange reserves stood at approximately USD 696 billion as of early June 2026. The next MPC meeting is scheduled for August 2026. Businesses with floating-rate debt, foreign currency exposures, or import-heavy supply chains should plan for a prolonged period of elevated rates.
Income Tax Act, 2025 – first full quarter of operation and CBDT guidance updates – June 2026.
The Income Tax Act, 2025, which replaced the 1961 Act on 1 April 2026, has completed its first full quarter of operation. The CBDT has issued FAQs on BIS and FII exemptions (5 June 2026) alongside other administrative guidance to assist with the transition. While the New Act introduces no new tax policy, its structural changes have material practical consequences for Tax Year 2026-27.
Key Takeaways:
- The most significant structural change is the replacement of the dual Previous Year / Assessment Year framework with a single Tax Year concept from 1 April 2026. Tax Year 2026-27 is the first year governed entirely by the New Act. The 1961 Act continues to apply to pre-April 2026 assessments, requiring advisers to operate under both frameworks simultaneously for several years.
- The New Act is materially condensed from 819 to 536 sections and from 390 to 190 prescribed forms with the Income Tax Rules, 2026 in force simultaneously. The CBDT has published a section cross-reference utility tool for mapping between the 1961 and 2025 Acts, an essential reference for compliance and litigation teams.
- Minimum Alternate Tax is restructured: set-off of pre-April 2026 MAT credit is limited to one-quarter of tax liability per year; no new MAT credit accrues from 1 April 2026; and the applicable rate is reduced to 14% from 15%. MAT is converted into a final tax under the New Act.
- The definition of undisclosed income is expanded to include virtual digital assets, and tax authorities may now access virtual digital spaces, email, social media, and online trading accounts during search and seizure proceedings. The GAAR framework is clarified: income from transfers of investments made before 1 April 2017 remains outside scope, while TRC documentation requirements are tightened for non-residents claiming treaty benefits.
SEBI proposes GARUDA mechanism to streamline AIF scheme launches consultation closes June 2026.
SEBI’s consultation paper on the GARUDA (Green-Channel: AIF Rollout Upon Document Acknowledgement) mechanism closed for public comment on 1 June 2026. The proposal materially streamlines new AIF scheme launches, building on the Fast-Track Mechanism (Phase 1) introduced in April 2026. India’s AIF industry now comprises 1,849 registered funds with cumulative commitments of Rs. 15.74 lakh crore and an accredited investor base that has grown over 300% year-on-year.
Key Takeaways:
- For regular AIF schemes, GARUDA proposes reducing the mandatory waiting period after PPM filing from 30 days to 10 working days significantly compressing time-to-market relative to comparable fund jurisdictions including DIFC and ADGM.
- For Accredited Investor-only (AI-only) schemes and Angel Funds, the merchant banker requirement is proposed to be eliminated entirely. These schemes would launch immediately upon PPM filing, supported by an undertaking from the AIF manager’s CEO and Compliance Officer, with SEBI conducting post-launch scrutiny on a risk-based sample basis.
- The AI-only AIF framework (introduced November 2025) already provides a lighter regulatory regime: no NISM certification requirement, no 1,000-investor cap, extended tenure of up to five years, and minimum corpus reduced to Rs. 25 crore. GARUDA adds launch-process efficiency to these structural advantages, making AI-only schemes the most operationally flexible vehicle in India’s AIF ecosystem.
- The GARUDA consultation follows the SWAGAT-FI framework for trusted foreign investors (in force 30 May 2026), reflecting a deliberate regulatory sequencing: India simultaneously opens doors to low-risk institutional foreign capital and streamlines the domestic vehicle through which that capital is deployed. AIF managers should review PPM processes and compliance officer sign-off protocols ahead of GARUDA’s anticipated implementation.
SEBI issues consultation paper on AIF investor consent and conflicted transactions -30 June 2026.
SEBI published a consultation paper on 30 June 2026 proposing a comprehensive overhaul of the investor consent framework and conflicted transaction provisions under the SEBI (Alternative Investment Funds) Regulations, 2012, with public comments invited until 21 July 2026. The paper addresses three governance gaps that have emerged as the AIF industry has scaled: absence of standardised consent methodology; inconsistent approval thresholds across provisions; and a narrow ‘associate’ definition that fails to capture the full range of conflicts in modern multi-strategy platforms.
Key Takeaways:
- AIFs would be permitted to adopt one of three standardised consent methodologies. Deemed consent, present-and-voting, or express voting disclosed in the PPM and applied consistently across all matters requiring investor approval within a scheme.
- A uniform 75% of unitholders by value is proposed as the approval threshold wherever investor consent is required under the AIF Regulations, replacing the current patchwork of different thresholds. This standardisation strengthens minority investor protections and provides certainty for both managers and investors.
- The current narrow ‘associate’ concept in conflict-of-interest provisions is proposed to be replaced by a broader ‘related party’ definition derived from the Companies Act, 2013 framework, capturing manager affiliates, portfolio companies, co-investors, and advisory relationships that the existing definition does not reach.
The consultation is the latest in a sequence of AIF governance reforms third amendment regulations (November 2025), accredited investor circular (December 2025), fast-track phase 1 (April 2026), GARUDA (May 2026), and now investor consent representing a comprehensive re-engineering of the framework that managers must track systematically.
