RBI MPC 2026 Highlights: Repo Rate Unchanged, RBI Balances Growth And Inflation Risks

The Reserve Bank of India’s (RBI’s) monetary policy committee (MPC) has kept the policy repo rate unchanged at 5.25 per cent after its three-day meeting, reviewing domestic growth conditions, inflation trends, and global developments. The central bank has also retained its neutral policy stance, signalling that future actions will continue to depend on evolving data.

Policy Decision And Stance

Along with the repo rate, RBI has kept the rate of standing deposit facility (SDF) at 5 per cent, and marginal standing facility (MSF) and bank rate at 5.50 per cent. The MPC said that the current policy rate is appropriate to support economic growth and keep inflation in the target range. By maintaining a neutral stance, RBI has left room to take action to change conditions without being committed in a particular direction. 

The central bank further said that the impact of earlier rate cuts has continued to transmit through the system. Lending and deposit rates have been softened across sectors, helping borrowers and maintaining financial stability. RBI has also said that it will be proactive in managing liquidity to facilitate flow of credit and effective transmission of policy.

Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat, said: “The repo rate has remained unchanged as widely expected, especially since further rate cuts could have impacted capital flows and the rupee. The neutral stance indicates that RBI will continue to evaluate evolving conditions, and it would be premature to comment on a rate cut in the next MPC meeting given that credit growth has already picked up.”

Inflation Outlook Positive

Inflation has remained below the tolerance band in recent months. Headline consumer price index (CPI) inflation has stayed low in November and December 2025, even though some firming has been observed. RBI has projected inflation at 4 per cent in the first quarter of 2026-27 and 4.20 per cent in the second quarter, levels that have remained close to the target. 

Vimal Nadar, national director and head, research, Colliers India, says, “RBI’s decision to keep the repo rate unchanged at 5.25 per cent and maintain a neutral stance comes at a time when consumer inflation remains well below target and domestic demand is resilient. Stability in benchmark lending rates, along with recent supply-side measures, is expected to support demand across real estate segments, particularly industrial and warehousing.”

The central bank attributed the slight upward revision in inflation projections mainly to higher prices of precious metals. Excluding gold, underlying inflation pressures have remained muted. Food inflation is also expected to remain under control, backed by good crop production, good buffer stocks, and favourable reservoir levels. At the same time, RBI has flagged risks from geopolitical tensions, energy price volatility, and adverse weather conditions.

Growth Momentum Has Continued

RBI said economic activity has been resilient in the face of global headwinds. Real gross domestic product (GDP) growth during 2025-26 was estimated at 7.40 per cent, led by private consumption as well as fixed investment. The services sector has remained a major contributor, whereas the manufacturing activity has shown signs of revival. 

Looking ahead, RBI has revised growth projections to 6.90 per cent and 7 per cent, respectively, for the first two quarters of 2026-27. The central bank has postponed full-year growth projections until the April policy review, given that a new GDP series is expected to be released later this month. 

Piyush Bothra, CFO and Co-founder, Square Yards, said “the decision to hold the repo rate was on expected lines”. “It signals a pause to assess the impact of earlier easing. With the December rate cut still awaiting full transmission, the focus now shifts to how effectively banks pass on lower lending rates to borrowers,” he added.

External Sector And Liquidity Conditions

On the external front, merchandise exports have shown a modest growth, but imports have accelerated at a faster rate, resulting in a widening trade deficit. The RBI has said that robust exports of services and stable inward remittances have helped maintain the current account deficit moderate and sustainable. Foreign exchange reserves remained at $723.80 billion in late January, which is over 11 months of import cover.

System liquidity has been in surplus. RBI has taken several steps, including open market operations (OMOs) and foreign exchange swaps, to inject liquidity in the market, it said. 

Financial Stability And Key Measures

RBI has said that banks and non-banking financial companies (NBFCs) have been financially sound with strong capital buffers, improved asset quality and sound profitability. Credit growth has picked up across sectors, particularly retail, services and micro, small and medium enterprises (MSMEs), but lending to large industries has also surged.

Support To Small Businesses

To support small businesses, the collateral-free loan limit for MSMEs has been proposed to be increased to Rs 20 lakh. Banks have also been proposed to be allowed to lend to real estate investment trusts (Reits) with safeguards, while select small NBFCs have been considered for regulatory relief.

Consumer Protection

To strengthen consumer protection and credit access, RBI has announced several measures. Draft guidelines have been proposed on mis-selling, loan recovery practices, and limiting customer liability in unauthorised digital transactions. The central bank has also proposed compensating customers up to Rs 25,000 for losses arising from small-value frauds.

Says Kunal Varma, founder and CEO of Freo: “As digital payments continue to grow across India, strengthening safety and customer protection becomes increasingly important. RBI’s proposal to introduce calibrated safeguards is aimed at reducing fraud and building greater trust in digital payments, especially for users who may be more vulnerable, while keeping the system easy and accessible.”

"RBI’s proposed discussion paper to explore enhanced safety measures for digital fraud protection is a forward-looking move," says Parimal Kumar Shivendu, executive director of Easebuzz. He further comments, "It will encourage the industry to adopt smarter risk controls without compromising user experience. At Easebuzz, we continue to invest in technology-led risk management aligned with evolving regulatory expectations.”