RBI holds repo rate at 5.25%, retains neutral policy stance

The Reserve Bank of India's (RBI) monetary policy committee (MPC) on Wednesday kept the benchmark repo rate unchanged at 5.25%, extending the pause in policy rates that has been in place since December 2025, in line with market expectations. The next bi-monthly MPC meeting is scheduled to be held from October 5 to 7, 2026.

In the third bi-monthly policy meeting of FY27, the six-member MPC, chaired by RBI Governor Sanjay Malhotra, unanimously voted to retain the repo rate at 5.25% while maintaining its neutral policy stance. The Standing Deposit Facility (SDF) rate was also kept unchanged at 5.0%, while the Marginal Standing Facility (MSF) rate and the Bank Rate remained at 5.50%.

“The MPC voted to keep the policy rate unchanged. The MPC also decided to retain the neutral stance to respond appropriately to macroeconomic developments. The MPC underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target,” Malhotra said.

He said that the decision was taken after a detailed assessment of the evolving macroeconomic and financial developments and the outlook.   

The central bank had last cut the repo rate by 25 basis points in December 2025, bringing it down from 5.50% to 5.25%. It had also kept policy rates unchanged and retained its neutral stance in the previous two bi-monthly policy reviews of FY27, held in April and June 2026.

The decision was widely in line with Street expectations, with economists anticipating that the RBI would keep policy rates unchanged for a fourth consecutive policy meeting while continuing its data-dependent, wait-and-watch approach.

While the central bank had adopted a relatively growth-supportive stance earlier this year, escalating geopolitical tensions in West Asia had added uncertainty to the macroeconomic outlook. During FY26, the apex bank delivered cumulative rate cuts of 125 basis points, lowering the repo rate from 6.50% to 5.25%, before pausing its easing cycle in December 2025.

Ahead of the policy announcement, most economists had not expected any material revisions to the RBI's growth and inflation projections from the June review. Instead, they anticipated the central bank would maintain a cautiously constructive tone, supported by resilient domestic economic activity and healthy FCNR(B) inflows, while acknowledging risks from geopolitical tensions, global financial market volatility and weather-related uncertainties, including El Niño.

Analysts had also pointed to heightened global volatility since the June policy. Brent crude prices had surged nearly 40% before retreating about 18%, while the U.S. Treasury yield curve had bear-steepened amid evolving expectations around the U.S. Federal Reserve's policy path.

Although first-quarter inflation undershot the RBI's projections, economists expected the MPC to continue highlighting weather-related risks to food prices, reiterating that any near-term inflationary pressures were likely to remain supply-driven unless they broadened into second-round effects.