RBI holds repo rate, flags geopolitical risks: Key takeaways from April MPC outcome

The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 5.25% and maintained its current monetary policy stance, as Governor Sanjay Malhotra flagged rising geopolitical tensions as a key risk to the inflation outlook despite strong domestic fundamentals. 

Addressing the monetary policy review, the governor said the central bank will remain watchful and responsive amid evolving global uncertainties. Here are some of the key takeaways from the MPC outcome. 

Rates, stance unchanged 

The RBI left both the repo rate and policy stance unchanged for the second consecutive meeting. In February, the central bank had also held rates steady after a 25 basis points cut in December. 

With the repo rate at 5.25%, the Standing Deposit Facility (SDF) rate remains at 5%, while the Marginal Standing Facility (MSF) rate stands at 5.50%. 

Inflation outlook 

Headline inflation has remained below the RBI’s target, supported by soft food prices and stable core inflation, though recent trends indicate a gradual firming. 

The RBI projects Consumer Price Index (CPI)-based inflation at 4.6% for FY27, within its tolerance band of 2–6%. Quarterly projections place inflation at 4% in Q1FY27, rising to 4.4% in Q2, 5.2% in Q3, and easing to 4.7% in Q4. 

Growth projections 

India’s real GDP growth is estimated at 6.9% for FY27, reflecting continued economic resilience. Quarterly growth is projected at 6.8% in Q1, 6.7% in Q2, 7% in Q3, and 7.2% in Q4. 

Rupee depreciation a concern 

Malhotra noted that despite strong macroeconomic fundamentals, the Indian rupee depreciated more in 2025–26 than in previous years. The currency has weakened by over 4% since the onset of the West Asia conflict, adding to import-driven inflationary pressures. 

He said the RBI will remain “proactive and pre-emptive” in liquidity management, while reiterating that exchange rate policy remains unchanged. “Interventions will continue to curb excessive volatility,” he said. 

Steps to boost ease of doing business 

The central bank proposed a series of measures aimed at improving the ease of doing business. These include simplifying board-level regulations for banks, consolidating supervisory guidelines, easing due diligence requirements for MSMEs on digital platforms, and revising capital adequacy norms. 

The RBI also plans to remove conditions on including quarterly profits in capital calculations and do away with the investment fluctuation reserve requirement. To deepen the term money market, it will allow greater participation from non-bank entities and enhance borrowing limits for standalone primary dealers. 

Middle East tensions key external risk 

The RBI identified the ongoing West Asia conflict as the biggest external risk to the economy, citing its potential impact on energy prices, trade flows, and financial markets. 

Rising crude oil prices, along with higher freight and insurance costs, could elevate input costs, disrupt supply chains, and widen the current account deficit. The central bank warned that prolonged supply disruptions could eventually dampen demand. 

It also cautioned that heightened global uncertainty may trigger capital outflows, currency depreciation, tighter financial conditions, and higher borrowing costs, weighing on investment and growth.