RBI maintains status quo; repo rate held at 5.25% amid global shifts

Governor Sanjay Malhotra pegs FY27 inflation at 4.6% as MPC adopts neutral stance following West Asia ceasefire

The Reserve Bank of India (RBI) on Wednesday decided to keep the benchmark repo rate unchanged at 5.25%, providing a breather to millions of borrowers as home loan EMIs are set to remain stable for now. This marks the second consecutive pause by the Monetary Policy Committee (MPC) led by Governor Sanjay Malhotra, coming on the heels of a fragile ceasefire in the US-Iran conflict that had briefly rattled global energy markets.

MPC maintains steady hand

The six-member rate-setting panel voted to maintain the status quo while continuing its "neutral" stance. This positioning allows the central bank the flexibility to pivot in either direction depending on how the domestic and international economic landscapes evolve. Delivering his eighth policy statement since taking office, Governor Malhotra emphasized that the Indian economy remains resilient despite recent volatility in the foreign exchange markets.

Inflation outlook remains cautious

The central bank has projected the Consumer Price Index (CPI) inflation for FY27 at 4.6%. While the immediate threat of a full-scale regional war in West Asia has subsided, the RBI remains vigilant regarding the "uncertain outlook" created by fluctuating oil prices. The Governor noted that elevated crude costs still pose a risk to the downward trajectory of inflation, particularly as supply chains through the Strait of Hormuz undergo normalization.

Robust growth targets set

In a boost to market sentiment, the latest news today confirms the RBI has pegged India’s GDP growth at 6.9% for the 2026-27 fiscal year. The quarterly projections suggest a steady climb, starting at 6.8% in Q1 and reaching 7.2% by the final quarter. Governor Malhotra attributed this optimism to strong domestic demand and a banking system that he described as "very safe and strong" under the apex bank’s rigorous supervision.

Banking health and liquidity

Addressing concerns over the financial sector, the Governor dismissed rumors regarding governance at HDFC Bank, asserting there are no red flags. He further highlighted that Indian banks are returning approximately ₹180 crore in unclaimed deposits to citizens every month. On the liquidity front, the Standing Deposit Facility (SDF) remains at 5.00%, while the Marginal Standing Facility (MSF) and the Bank Rate stand at 5.50%.

Global headwinds and exports

The India News Update on the external sector reveals a healthy forex reserve of $696.1 billion as of early April. However, the Governor acknowledged that the recent West Asia conflict might still cast a shadow on India’s exports. He noted that the Russia-Ukraine war, conversely, now has a "negligible impact" on the domestic economy, allowing the MPC to focus more on localized price pressures and weather disturbances.

Relief for retail borrowers

For retail consumers, this status quo is a welcome signal. With the repo rate at a three-year and eight-month low, the Governor hinted that home loan interest rates are likely to remain subdued for an extended period. This follows a cumulative 1.25% cut in the repo rate since February 2025, which has already seen banks reduce fixed deposit rates by over 1%.