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RBI Holds Repo Rate at 5.25%, Maintains Neutral Stance Amid Global Headwinds

The Reserve Bank of India's Monetary Policy Committee has unanimously decided to keep the policy repo rate unchanged at 5.25%. RBI Governor Sanjay Malhotra stated the decision considered global headwinds and a benign inflation outlook, which remains below the central bank's tolerance band. The committee is maintaining a neutral monetary policy stance, balancing inflation control with growth support. The growth outlook for the economy remains favorable and is expected to be driven by domestic factors.

Key Points: RBI Keeps Repo Rate Unchanged, Sticks to Neutral Policy Stance

  • Repo rate unchanged at 5.25%
  • MPC maintains neutral policy stance
  • Inflation below tolerance band, outlook benign
  • Growth outlook favorable, driven by domestic factors
  • Earlier rate cuts still transmitting through economy
3 min read

RBI leaves repo rate unchanged, sticks to neutral policy stance

RBI Governor announces MPC decision to hold repo rate at 5.25%, maintains neutral monetary stance citing controlled inflation and favorable growth outlook.

"The decision to maintain the status quo... had been taken after careful consideration of the macroeconomic conditions - Sanjay Malhotra"

Mumbai, Feb 6

RBI Governor Sanjay Malhotra announced on Friday that the Monetary Policy Committee has unanimously decided to keep the policy repo rate unchanged at the current level of 5.25 per cent and stick to the neutral monetary policy stance.

The RBI Governor said that the decision to maintain the status quo in the policy rate had been taken after careful consideration of the macroeconomic conditions and the outlook for the economy ahead.

He said that since the last monetary policy meeting in December, global headwinds have intensified, but the trade deals signed by the government augur well for the economy going ahead.

Malhotra further stated that the RBI has decided to stick to a "neutral policy stance".

A neutral stance requires neither stimulation nor curbs on liquidity as it strikes a fine balance between controlling inflation without hurting growth. The RBI has been sticking to the neutral stance as it was waiting for the earlier monetary policy easing to still play out, and the unfolding of trade-related implications.

Malhotra said the inflation level was under control and below the RBI tolerance band. The inflation outlook was benign, and the RBI's projection for CPI inflation has been revised for Q1 and Q2 of the 2026-27 to 4 per cent and 4.2 per cent, respectively. He said the minor increase in the projection was due to the expected increase in the prices of precious metals. However, the underlying inflation is expected to be well within the tolerance level.

The RBI Governor also said that the growth outlook for the Indian economy is favourable and expected to be driven by domestic factors.

The Monetary Policy Committee had reduced the repo rate by 25 basis points to 5.25 per cent from 5.5 per cent in the December review to spur growth in the economy.

The Monetary Policy Committee, chaired by the RBI Governor, had left the repo rate unchanged in the reviews held in August and October to keep inflation in check.

Before that, the RBI reduced the repo rate by 100 bps from 6.5 per cent to 5.5 per cent in quick succession between February and June, and the transmission to the economy was still working out.

A lower policy rate and more liquidity with banks lead to a decline in interest rates on bank loans, which makes borrowing easier for consumers as well as businesses, resulting in more consumption and investments in the economy, leading to higher growth.

However, the effectiveness of the rate cut hinges on how quickly and efficiently commercial banks pass on the benefits to borrowers.

- IANS

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Reader Comments

R
Rohit P
Good move for now, but I hope banks actually pass on the benefits of the earlier cuts! My home loan EMI hasn't budged much despite all the talk of rate reductions. The transmission mechanism needs to be stronger.
A
Aditya G
Neutral stance is the right call. Balancing growth and inflation is a tightrope walk, especially with global uncertainties. Focusing on domestic drivers of growth is our best bet. Jai Hind!
S
Sarah B
As a small business owner, I appreciate the predictability. It helps me plan my investments and inventory without worrying about sudden interest rate shocks. Hope the growth outlook holds true!
K
Karthik V
The revision in CPI projection for 2026-27 is a bit concerning, even if it's minor. We must keep a hawk eye on food and fuel prices, they affect the common man the most. RBI should remain vigilant.
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Michael C
Respectfully, while the neutral stance seems safe, I wonder if a slightly more accommodative stance could have given a stronger push to investment. Global headwinds are real, but sometimes you need to be bold to spur growth.
N
Neha E
This is positive news for the stock market! A stable interest rate environment is always better for equities. Hopefully, this will boost investor sentiment further. 📈

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