The Reserve Bank of India (RBI) has kept its benchmark repo rate unchanged at 5.25%, with the Monetary Policy Committee (MPC) unanimously voting to maintain the current policy stance while closely monitoring evolving domestic and global economic conditions.
Announcing the first bi-monthly monetary policy of the current financial year, RBI Governor Sanjay Malhotra said the central bank has retained a neutral monetary policy stance, balancing inflation management with the need to support economic growth amid heightened global uncertainty.
Policy Rates Remain Unchanged
Following the MPC's decision, the key policy rates remain:
- Repo Rate: 5.25%
- Standing Deposit Facility (SDF): 5.00%
- Marginal Standing Facility (MSF): 5.50%
- Bank Rate: 5.50%
The six-member Monetary Policy Committee met over three days before arriving at its unanimous decision to maintain existing interest rates.
RBI Projects 6.9% GDP Growth
The central bank expects India's economy to remain resilient despite global headwinds.
The RBI projected real GDP growth of 6.9% for the current financial year, while estimating that the economy expanded by 7.6% during the previous fiscal year.
Governor Malhotra said India's macroeconomic fundamentals continue to remain strong, providing the economy with greater resilience against external shocks compared to previous years.
According to the RBI, government initiatives aimed at supporting exports, strengthening domestic manufacturing and protecting supply chains are expected to cushion the impact of global disruptions.
Inflation Forecast at 4.6%
The RBI has projected Consumer Price Index (CPI) inflation at 4.6% for the current financial year.
However, Governor Malhotra cautioned that inflation risks remain elevated due to several external factors, including:
- Persistently high global energy prices.
- Continuing geopolitical tensions in West Asia.
- Potential emergence of El Niño weather conditions affecting agricultural output.
- Rising international freight and insurance costs.
- Global supply-chain disruptions.
The Governor noted that these developments could increase production costs across industries and create additional inflationary pressures.
West Asia Conflict Remains a Key Concern
The RBI adopted a cautious "wait-and-watch" approach regarding the ongoing conflict in West Asia, stating that rapidly evolving geopolitical developments continue to influence both inflation and economic growth projections.
Governor Malhotra observed that prolonged geopolitical instability could:
- Increase crude oil and energy prices.
- Raise logistics and transportation costs.
- Disrupt international supply chains.
- Affect the availability of key industrial inputs.
- Moderate economic growth if disruptions persist.
Despite these concerns, the central bank expressed confidence that India's diversified economic structure and policy measures would help mitigate the overall impact.
RBI Reiterates Market-Determined Rupee Policy
The Governor also addressed movements in the Indian rupee, noting that the currency had experienced relatively higher depreciation during 2025-26 compared to historical averages.
He reiterated that the RBI's exchange rate policy remains unchanged.
According to the central bank, interventions in the foreign exchange market are undertaken solely to curb excessive volatility rather than defend any predetermined exchange rate level.
Governor Malhotra emphasised that exchange rates in India remain fundamentally market-determined, while the RBI will continue intervening only to prevent disruptive market conditions that could amplify currency fluctuations beyond economic fundamentals.
Financial Markets Watch Future Policy Direction
Market participants interpreted the RBI's decision as signalling continued caution amid uncertain global conditions.
With inflation remaining within the central bank's tolerance range but external risks increasing, economists expect future monetary policy decisions to remain data-driven, particularly regarding inflation, global commodity prices and geopolitical developments.
The central bank indicated it will continue monitoring incoming economic data before considering any changes to interest rates in subsequent policy reviews.
Shunyatax Global Insight
The RBI's decision to maintain the repo rate reflects a balanced approach between sustaining economic growth and containing inflation risks. While India's domestic fundamentals remain relatively robust, uncertainties stemming from geopolitical conflicts, volatile energy markets and climate-related risks continue to shape monetary policy. The central bank's emphasis on flexibility and market stability signals that future decisions will remain closely tied to evolving global and domestic economic conditions.
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