MPC Policy Outcome: Repo Rate Held Steady at 5.25%; Inflation Projections Revised Upward

The Reserve Bank of India’s Monetary Policy Committee held the benchmark repo rate steady at 5.25%, unanimously, and continued to maintain a neutral policy stance. One external MPC member, Ram Singh, retained his view that the stance should be changed to accommodative from neutral.

RBI Governor Sanjay Malhotra stated that amid a heightened geopolitical environment and elevated uncertainty, the Indian economy remains robust, with inflation below the tolerance band. The RBI’s inflation target is 4%, with a tolerance band of +/- 2%. Malhotra added that while external headwinds have intensified globally, the India-EU free trade agreement and the proposed India-US deal augur well for the near-term growth outlook.

The rate-setting panel of the central bank also revised inflation projections upward, with inflation expected to be at 4.0% in Q1 (April–June) and 4.2% in Q2 (July–September). The upward revision in inflation estimates is primarily driven by a rise in global precious metal prices. Malhotra stated that, given domestic factors and the global macroeconomic environment, “the MPC decided that the current policy rate is appropriate and agreed to retain the neutral stance.” He added that going forward, policy decisions will be guided by evolving conditions and upcoming data from the new series of the Consumer Price Index (CPI), which will be rolled out on February 12.

On the growth front, Malhotra said the Indian economy continues to record steady growth of 7.4% for FY26 amid global headwinds. Imports outpacing exports remain a challenge for growth prospects. The RBI projects GDP growth at 6.9% in Q1 and 7.0% in Q2. “The RBI will remain proactive in providing liquidity to meet the productive requirements of the economy and facilitate rate transmission,” Malhotra said.

In 2025, the MPC cumulatively reduced the repo rate by 125 basis points to 5.25% from 6.50% in December 2024. Aligning with fiscal policy and announcements made in the Union Budget, the RBI proposes to issue regulatory guidelines on corporate bond indices and total return swaps (TRS) on corporate bonds. The central bank also proposed issuing draft guidelines to provide greater flexibility for entities undertaking foreign exchange (FX) transactions.

The next MPC meeting is scheduled for April 6–8.