RBI Monetary Policy Committee Announcements: RBI Governor Sanjay Malhotra, in the first policy review after the Union Budget 2026-27, kept the short-term lending rate or repo rate unchanged at 5.25 percent with a neutral stance.

This comes even as RBI cut the policy rate by 125 basis points from February 2025. In the last policy review in December, the RBI cut the repo rate by 25 basis points to 5.25 percent.

Meanwhile, headline CPI-based retail inflation has been below the lower band of 2 percent set by the government for the past four months. The government has tasked the central bank with ensuring that retail inflation based on the consumer price index (CPI) remains at 4% with a margin of 2% on either side.

WHY HAS RBI NOT CHANGED THE REPO RATE?

In the RBI MPC announcements, Governor Malhotra explained why the MPC decided not to change the repo rate:

1. He said that since the last MPC, “external headwinds have intensified”, although the successful completion of trade deals bodes well for the economic outlook. Domestic inflation and short-term growth prospects also remain positive.
2. Overall inflation during the November-December period remained below the tolerance band. “The outlook for CPI inflation in the first quarter of 2026-27 and the second quarter remains benign and close to the inflation target. The slight upward revision in the inflation outlook is mainly due to higher precious metal prices, which contribute around 60-70 basis points. Core inflation remains low,” it said.
3. In addition, economic activity remained resilient and early advance estimates suggest a continued pace of growth, driven by domestic factors despite a challenging external environment.

“Based on a comprehensive review of domestic macroeconomic conditions and the outlook, the MPC finds the current policy rate to be appropriate. Accordingly, the MPC voted to continue with the existing policy rate,” it said, adding that Prof Ram Singh, director of the Delhi School of Economics and a member of the MPC, was of the view that the stance should change from neutral to accommodative.

“Going forward, the MPC will be guided by developments in macroeconomic conditions and the outlook based on the new series data to chart the future course of monetary policy,” Malhotra said.