- Decision
- Maintain
- Rate change
- 0 bps
- policy repo rate
- 5.25%
The Reserve Bank of India’s Monetary Policy Committee kept the policy repo rate unchanged at 5.25 %, left the Standing Deposit Facility at 5.00 % and the Marginal Standing Facility/Bank Rate at 5.50 %, and retained a neutral stance, judging that sub-target February CPI inflation of 3.2 % (after 2.7 % in January) is overshadowed by rising energy-led price risks and potential weather-related food pressures amid still-robust domestic demand and investment. The decision follows a cumulative 75 bp of repo cuts between April and December 2025 and an unchanged rate in February 2026. Operating parameters of the liquidity adjustment facility were unaltered. Real GDP grew 7.6 % in 2025-26 and is projected to moderate to 6.9 % in 2026-27, with quarterly growth seen ranging from 6.7 % to 7.2 %. CPI inflation is forecast to average 4.6 % in 2026-27, though underlying core (excluding food, fuel and precious metals) stayed subdued at 2.1 % in early 2026. The West Asia conflict has upended global supply chains, driven up commodity prices, pushed sovereign yields higher and strengthened the USD, while threatening India’s merchandise exports via costlier and disrupted shipping routes. Reaffirming India’s macroeconomic resilience, the MPC said it will remain vigilant and stands ready to adjust policy as the growth-inflation balance evolves.
Rate evolution
From June 2025 to August 2026, the Reserve Bank of India lowered the policy repo rate by 75 basis points from 6.00 per cent to 5.25 per cent, front-loading a 50 basis point cut in June, pausing through October, easing again in December and then holding from February through August. The June move reflected sharply softer CPI inflation, a revised-down inflation outlook seen durably aligned with the 4 per cent target and likely to undershoot it marginally, alongside growth that remained below aspirations in a challenging global environment, after which the Monetary Policy Committee shifted the stance to neutral, citing limited remaining space and the need to assess incoming data. The subsequent pause came even as headline inflation turned more benign on food-price disinflation, Goods and Services Tax rate rationalisation and favourable monsoon conditions, because core inflation stayed around 4 per cent, base effects were expected to lift headline inflation later in 2025-26, and the committee wanted more clarity on the transmission of earlier rate cuts and fiscal measures as tariff, trade and geopolitical uncertainties clouded the external outlook.
The Reserve Bank of India cut the policy repo rate by 25 basis points in December as exceptionally benign food prices and subdued underlying inflation gave room to support growth, but held it at 5.25 per cent in February, judging the level appropriate amid resilient domestic growth and an inflation outlook still near target, while flagging external headwinds and commodity-price, weather and geopolitical risks. In April, the committee left the policy repo rate unchanged and maintained the neutral stance as contained headline inflation and muted core pressures were offset by rising energy, weather, supply-chain and second-round inflation risks from the West Asia conflict, and it held again in June as the conflict continued, domestic demand remained resilient and higher fuel and input costs, a sub-normal south-west monsoon forecast and El Niño risks warranted greater clarity. At its August 3 to 5 meeting, the committee unanimously kept the policy repo rate at 5.25 per cent and retained the neutral stance, noting that headline CPI inflation had moved above target mainly because of food and fuel without becoming broad-based, while core inflation excluding precious metals remained benign and growth stayed resilient, but uncertainty over the south-west monsoon, El Niño, geopolitics and global trade policy required more clarity on inflation’s path and composition before any policy action.