The Reserve Bank of India kept its repo rate unchanged at 5.25% on February 6, 2026, in its latest policy decision. The decision came as trade agreements reduced uncertainty and supported the outlook.
The move also marked the first monetary policy review after the Union Budget for FY2026-27. Governor Sanjay Malhotra said the RBI will rely on incoming data when it sets the next path for rates.
The Monetary Policy Committee met from February 4 to 6 and voted unanimously to hold the benchmark rate at 5.25%. Malhotra kept the stance at neutral and said inflation remains benign.
He said the current rate fits the inflation and growth outlook. He linked future moves to those forecasts. The RBI has cut rates by 125 basis points since February 2025, including a 25-basis-point cut in December.
Economists had expected the RBI to hold the rate steady. The neutral stance also signaled that the RBI may keep rates low for longer, unless inflation or growth shifts.
Malhotra said, “external headwinds have intensified.” He added that completed trade deals “augur well for the economic outlook.” The RBI did not publish a full-year FY27 forecast because a new GDP and inflation series arrives later in February.
Instead, it projected 6.9% GDP growth for April–June 2026 and 7.0% for July–September 2026. It projected CPI inflation at 4.0% in Q1 FY27 and 4.2% in Q2. It said it will release full-year numbers in April.
Malhotra said the RBI will publish full-year growth and inflation projections in April. He linked that timing to the rollout of revised national accounts and CPI series. Until then, the RBI will track high-frequency indicators to gauge momentum across the economy.
For the current financial year, the RBI raised its inflation projection to 2.1% from 2.0%. It also cited December retail inflation at 1.33%, which stayed well below the 4% target.
The RBI expects 7.4% growth in the current financial year. The government’s economic adviser sees 6.8% to 7.2% growth next year.
Trade policy formed a key part of the updated backdrop. A U.S. deal would cut tariffs on Indian imports to 18% from nearly 50%, with expectations to finalize it by March. India also concluded a free trade pact with the European Union, which the RBI cited in its assessment.
Malhotra flagged upside risks to inflation from geopolitical uncertainty, volatile energy prices, and adverse weather events.
After the announcement, the rupee traded about 0.1% lower and equity indexes held near flat. Bond yields rose after the RBI did not announce fresh liquidity measures alongside the rate decision.
Market trackers reported the 10-year government bond yield rising as much as six basis points to about 6.70%. Malhotra said the RBI will manage liquidity proactively as government cash flows and foreign-exchange operations change rupee liquidity.
The RBI said large government borrowing and forex interventions have reduced rupee liquidity and pushed yields higher. Economists at DBS Bank and Kotak Mahindra Bank said the RBI may pause longer and focus on liquidity stability.