RBI holds key policy rate at 5.25%

Mumbai: The Reserve Bank of India’s (RBI) monetary policy committee (MPC) on Wednesday kept the repo rate steady at 5.25% and maintained its stance as ‘neutral’.

A Mint poll of 10 economists and market participants had pointed to rising inflation risks and a weakening growth outlook, with all expecting the MPC to hold rates while signalling a more cautious policy stance.

In 2025, the RBI had cumulatively cut the repo rate—the rate at which it lends short-term funds to banks—by 125 basis points (bps), with the last cut of 25 bps in December to 5.25%.

RBI governor Sanjay Malhotra said that India is better placed today than in previous episodes of crises and many other economies.

The RBI pegged FY26 growth at 7.6% under the new series. The gross domestic product (GDP) projection for FY26 was higher than the 6.8-7.2% pegged by the Economic Survey earlier this year.

Malhotra said that the growth estimates corroborate the underlying strong momentum in economic activity supported by robust consumption and investment amid supportive policy measures, ongoing structural reforms and favourable financial conditions.

“Going forward, elevated energy and other commodity prices, as well as shocks to availability of inputs due to disruptions in the Strait of Hormuz, are likely to impact growth this year,” the governor said.

He said headline inflation remains contained and below the target. “However, upside risks to the inflation outlook driven by increased energy prices, pressures, and probable weather disturbances affecting food prices have increased.”

The central bank projected inflation for FY27 at 4.6%.

Core inflation pressures remain muted, although supply chain dislocations and the risk of second round effects render the future inflation trajectory uncertain, said Malhotra.