The Reserve Bank of India (RBI) on Wednesday kept its benchmark repo rate unchanged at 5.25 per cent, marking the second consecutive policy pause following a hold in February after a rate cut in December last year.
The decision by the Monetary Policy Committee (MPC) was unanimous. The standing deposit facility (SDF) rate and the marginal standing facility (MSF) rate were also retained at 5 per cent and 5.5 per cent, respectively. The central bank maintained its policy stance as “neutral”.
With this, the MPC has left rates unchanged in four of the last five meetings, having delivered cumulative rate cuts of 125 basis points across February, April, June and December 2025.
This was the first policy decision since the escalation of the US-Israel-Iran conflict, which has now entered its sixth week, with a temporary pause in hostilities announced to facilitate negotiations.
RBI Governor Sanjay Malhotra said India’s macroeconomic fundamentals remain strong, providing resilience against external shocks. However, he cautioned that an initial supply shock could evolve into a demand shock if disruptions persist and supply chains take longer to normalise.
“From here, the RBI is likely to continue with a data-dependent approach, suggesting an extended pause in rates. The broader policy stance is also likely to remain neutral, although liquidity conditions may continue to be managed in an accommodative manner. Overall, this policy mix appears neutral to marginally supportive for equities, fixed income and the foreign exchange market,” said Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Group.
The central bank raised its real GDP growth projection for FY2026 to 7.6 per cent from 7.4 per cent earlier, while forecasting growth of 6.9 per cent for FY2027, with risks tilted to the downside.
“While domestic growth remains resilient with FY27 GDP projected at 6.9%, heightened geopolitical tensions and volatile crude prices warrant caution. By staying on pause, the central bank aims to keep inflation aligned within its comfort band, even as it preserves flexibility to respond to external shocks and currency pressures, ensuring the Indian economy remains on a steady expansion path,” said Ajit Mishra, SVP, Research, Religare Broking.
Financial markets reacted positively to the policy outcome. The Nifty Bank rose 4.7 per cent, while rate-sensitive sectors such as automobiles and real estate gained up to 7 per cent each. Consumer stocks also advanced around 4 per cent.
The Nifty 50 rose 3.45 per cent to 23,928.80, while the BSE Sensex gained 3.71 per cent to 77,387.66 in morning trade, marking a strong rebound amid improving global sentiment policy stability. |
