RBI Keeps Repo Rate Unchanged in Latest 2026 Monetary Policy Review
MUMBAI — The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to keep the policy repo rate unchanged in its latest bi-monthly policy review. Following a cumulative reduction of 125 basis points in 2025 that brought the repo rate down to 5.25%, the central bank opted for a pause to closely monitor persistent external challenges, middle-east geopolitical risks, and volatile food prices.
The decision aligns with the RBI's long-term flexible inflation-targeting (FIT) mandate, which aims to anchor consumer price index (CPI) retail inflation around the 4% target within a ±2% tolerance band.
Key Highlights of the Policy Review
Repo Rate Maintained: The policy repo rate stands firm at 5.25%. Consequently, the Standing Deposit Facility (SDF) rate and the Marginal Standing Facility (MSF) rate remain unchanged.
Stance of Monetary Policy: The MPC continues its balanced approach, focusing on ensuring that inflation progressively aligns with the target while supporting macroeconomic growth.
GDP Growth Forecast: Backed by resilient domestic consumption and steady public investment, India's GDP growth projection for the financial year has been raised to 7.3%, reflecting robust industrial and service sector performances.
Inflation Outlook: Headline inflation is projected to hover around 4.5% for the fiscal year due to lingering supply-side disruptions, before expectedly easing toward the 4.0% target as food prices moderate.
Balancing Growth with Price Stability
The central bank's cautious pause reflects a complex economic environment. While core inflation remains comfortably stable—partially insulated by muted global manufacturing prices—the shadow of headline food inflation and an volatile global commodity market has kept policymakers on alert.
Historically, shifting away from aggressive adjustments allows the banking system to fully absorb previous cuts. The 2025 monetary easing successfully triggered a drop in average lending rates by nearly 97 basis points, boosting non-food bank credit expansion up to 14.5% by early 2026. Maintaining the status quo ensuring that this strong credit flow to productive industries and services continues without stoking inflationary fire.
By keeping the repo rate steady, the RBI aims to safeguard household purchasing power and anchor public inflation expectations while giving the domestic economy enough runway to clock the projected 7.3% growth.
What is the Repo Rate? The repo rate (repurchase rate) is the key interest rate at which the RBI lends short-term money to commercial banks against government securities. It serves as the primary tool for managing liquidity and controlling inflation in the Indian economy.
References
Asian Development Bank. (2026). Asian Development Outlook (ADO) April 2026: India. Asian Development Bank Report.
Eichengreen, B., & Gupta, P. (2024). Inflation Targeting in India: A Further Assessment. Margin: The Journal of Applied Economic Research, 18(1), 7-42. https://doi.org/10.1177/00252921241289522
Sengupta, R. (2026). Monetary Policy in India: The Long Road to Inflation Targeting. IGIDR Working Paper (WP-2026-005).