RBI MPC holds repo rate at 5.25%,revises GDP forecast to 7.4%

The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday decided to keep the policy repo rate unchanged at 5.25 per cent and maintain a neutral policy stance, citing stable growth conditions and manageable inflation pressures.Announcing the decision, RBI Governor Sanjay Malhotra said the six-member MPC met on February 4, 5 and 6 and voted unanimously to hold rates steady after a comprehensive assessment of evolving macroeconomic conditions and the economic outlook.“After a detailed assessment of evolving macro-economic conditions and the outlook, the MPC voted unanimously to keep the policy repo rate unchanged at 5.25 per cent,” Malhotra said.The decision follows a 25-basis-point rate cut announced in December 2025, taking the cumulative reduction in the benchmark rate to 125 basis points since February last year.
Policy rates unchanged
With the repo rate unchanged, the standing deposit facility (SDF) rate remains at 5 per cent, while the marginal standing facility (MSF) rate and the bank rate continue at 5.50 per cent. The RBI reiterated that future policy actions will be guided by incoming inflation data based on the revised CPI series.“Monetary policy will be guided by new inflation data based on the revised series,” the Governor noted.
Growth outlook strengthened
The central bank revised its growth projections upwards, reflecting confidence in India’s medium-term economic momentum.Malhotra said the RBI has raised its GDP growth forecast for FY26 to 7.4 per cent from the earlier estimate of 7.3 per cent. The outlook for the first half of FY27 has also been improved, with real GDP growth for Q1FY27 revised to 6.9 per cent from 6.7 per cent earlier, and Q2FY27 to 7 per cent from 6.8 per cent.“We are deferring the projections for the full year to the April policy as the new GDP series will be released later in the month,” Malhotra said.Highlighting external developments, the Governor said India remains well-placed amid global uncertainty. “Amid heightened geopolitical tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. With the signing of a landmark trade deal with the European Union and a US trade agreement in sight, growth momentum is likely to be sustained for a longer period,” he added.
Inflation seen rising but within tolerance band
The RBI acknowledged that inflation is expected to rise gradually, although it is likely to remain within the central bank’s tolerance band of 2–6 per cent.The central bank revised its CPI-based inflation projection for FY26 to 2.1 per cent from 2 per cent earlier. Inflation for Q4FY26 is now projected at 3.2 per cent, up from 2.9 per cent, while CPI inflation for Q1FY27 and Q2FY27 is estimated at 4 per cent and 4.2 per cent, respectively.“Unfavourable base effects stemming from a large decline in prices observed during Q4FY25 would lead to an uptick in year-on-year inflation in Q4FY26,” Malhotra said.The RBI will present its full-year CPI inflation projection for FY27 in the April 2026 policy statement.
Key announcements for banks and customers
Alongside the policy decision, the RBI unveiled a series of regulatory measures aimed at strengthening customer protection, expanding financial inclusion and improving ease of doing business for non-banking financial companies (NBFCs) and urban cooperative banks (UCBs).The central bank will issue three draft guidelines focused on curbing mis-selling, regulating loan recovery practices and engagement of recovery agents, and limiting customer liability in unauthorised electronic banking transactions. It also proposed a framework to compensate customers up to ₹25,000 for losses arising from small-value fraudulent transactions.In addition, the RBI will release a discussion paper on measures to enhance the safety of digital payments.To support credit flow to small businesses, the RBI proposed increasing the limit for collateral-free loans to micro, small and medium enterprises (MSMEs) from ₹10 lakh to ₹20 lakh. Banks will also be permitted to lend to real estate investment trusts (REITs) under specified prudential safeguards to encourage financing to the real estate sector.For NBFCs, the RBI proposed exempting entities with no public funds and no customer interface, and with asset sizes not exceeding ₹1,000 crore, from mandatory registration. It also suggested removing the requirement for certain NBFCs to seek prior approval for opening more than 1,000 branches.

(Business Correspondent)