The Reserve Bank of India’s decision to keep the repo rate unchanged at 5.25% while maintaining a neutral stance has drawn a broadly positive response from banks, NBFCs, and fund houses, which view the move as a prudent balancing act amid global uncertainty.

At a time when geopolitical tensions in West Asia continue to cloud the macroeconomic outlook, financial sector leaders believe the central bank has struck the right balance between supporting growth and managing inflation risks. The policy also kept key rates under the liquidity adjustment facility unchanged, with the standing deposit facility (SDF) at 5.0% and the marginal standing facility (MSF) at 5.5%.

Safety-first approach

Bankers described the RBI’s move as a “safety-first” approach. Ajay Kumar Srivastava, Managing Director & CEO of Indian Overseas Bank, said the decision reinforces macroeconomic stability while ensuring predictability in borrowing costs for both households and businesses. While India’s growth remains strong at 7.6%, he noted that caution is warranted given volatility in crude oil prices and persistent geopolitical risks.

“We also appreciate the RBI’s continued focus on improving ease of doing business, especially for MSMEs. The removal of due diligence requirements for onboarding onto the TReDS platform is a progressive step that will significantly enhance liquidity access and working capital efficiency for small businesses,” he added.

From a lender’s perspective, the unchanged rate environment provides stability to credit markets. Vinod Francis, CFO of South Indian Bank, said steady rates and adequate liquidity will continue to support credit growth across retail and MSME segments, while also aiding asset-liability management.

“The status quo provides much-needed stability to the financial system. A steady rate environment, supported by adequate liquidity, should continue to support credit growth across retail and MSME segments, while also strengthening asset-liability management for lenders,” he said.

Stable rates to support credit demand

George Alexander Muthoot, MD of Muthoot Finance, said the policy reinforces confidence in India’s economic fundamentals. He expects stable rates to provide predictability to financial markets while supporting credit demand, particularly in MSME and retail segments.

“A steady rate environment, coupled with proactive liquidity management, is likely to support continued credit offtake and business confidence,” he said.

Tribhuwan Adhikari, MD & CEO of LIC Housing Finance, said the decision was in line with expectations and reflects a calibrated approach to balancing growth and inflation. The steady policy environment, he noted, provides much-needed visibility to both lenders and borrowers.

“Stable interest rates, coupled with improving economic fundamentals, are likely to support sustained housing demand across markets. We expect this policy continuity to further strengthen buyer sentiment and encourage fence-sitters to move ahead with home purchase decisions,” he said.

V.P. Nandakumar, CMD of Manappuram Finance, said the status quo reflects a cautious, data-dependent approach amid heightened global uncertainties.

“While domestic macroeconomic fundamentals remain resilient, the MPC has rightly highlighted emerging upside risks to inflation, driven by potential increases in crude oil and other commodity prices, along with possible supply-side disruptions. The evolving global environment warrants continued vigilance,” he noted.

Bond market outlook remains stable, cautious

From a fixed income standpoint, the policy has reinforced expectations of a stable yet cautious interest rate environment, with bond markets reacting in a measured manner.

“G-sec yields were only mildly higher following the policy statement, although yields have fallen 10–20 bps since the recent ceasefire announcement. We remain constructive on the near end of the curve given the RBI’s assurance of maintaining adequate system liquidity and elevated yields,” said Naval Kagalwala, COO & Head of Products, Shriram Wealth.

Devang Shah, Head – Fixed Income at Axis Mutual Fund, expects the 10-year G-sec yield to trade in the 6.75%–7.0% range in the first half of 2026, highlighting opportunities for investors.

“The current scenario presents an opportunity to take advantage of both tactical duration and accrual, supported by easing geopolitical tensions and a neutral to dovish policy stance. Corporate bond yields remain attractive across the curve,” he said.

He added that the neutral stance remains appropriate given that the near-term growth and inflation outlook has not materially changed. “Markets have already priced in aggressive rate hikes. With liquidity expected to remain comfortable and inflation within the RBI’s comfort zone, we expect a pause in rate action over the next couple of policy meetings,” Shah said.

Amit Somani, Deputy Head – Fixed Income at Tata Asset Management, said the RBI’s emphasis on liquidity has helped anchor the shorter end of the yield curve. “RBI continues to prioritise ample system liquidity. We expect short-term yields to soften from recent highs as liquidity conditions ease,” he said.

Echoing a similar view, Abhishek Bisen, Head – Fixed Income at Kotak Mahindra AMC, said market expectations may be overstating the likelihood of aggressive rate hikes. “Markets seem to be pricing in significant rate hikes over the next 12–15 months. However, given the recent ceasefire in West Asia, we believe the actual rate trajectory may be more moderate than what is currently priced in,” he said.