RBI Monetary Policy Committee keeps repo rate unchanged at 5.25%

The Reserve Bank of India RBI on Friday kept the key policy repo rate unchanged at 5.25 per cent, maintaining its current interest rate stance while upgrading its assessment of economic growth amid improving domestic demand, fiscal support and trade developments.

The decision was taken by the six member Monetary Policy Committee MPC of the RBI, chaired by Governor Sanjay Malhotra, at the conclusion of its February bi monthly policy meeting. The committee retained its stance at neutral.

In its December monetary policy review, the RBI had cut the repo rate by 25 basis points to 5.25 per cent from 5.50 per cent. Friday’s decision marks the third instance of rates being held unchanged in the current cycle, following earlier pauses in August and October.Since February 2025, the central bank has reduced the repo rate by a cumulative 125 basis points.

RBI upgrades growth outlook

The RBI revised its growth outlook upward for both the current and next financial years, reflecting a stronger assessment of economic momentum.

For FY2025 to 26, the MPC raised its real GDP growth forecast to 7.4 per cent from its earlier estimate of 7.3 per cent.

For FY2026 to 27, the central bank projected real GDP growth of 6.9 per cent in the first quarter and 7 per cent in the second quarter, with risks described as evenly balanced.

Malhotra said several measures announced in the Union Budget 2026 are expected to support growth and added that services exports are likely to remain resilient.

Manufacturing outlook improves

The RBI Governor said manufacturing activity is expected to gain momentum in the coming quarters.

“Improving corporate performance and sustained momentum in the informal sector will boost manufacturing,” Malhotra said in his policy address.

External sector resilient, FDI confidence strong

Commenting on the external environment, Malhotra said India continues to remain a preferred destination for greenfield foreign direct investment projects, reflecting strong investor confidence in the country’s long term growth prospects.

He added that India’s external sector remains resilient despite global uncertainties, supported by stable capital flows and improving trade prospects.

Inflation outlook remains comfortable

The RBI said its inflation outlook remains comfortable, with consumer price index inflation for FY2025 to 26 projected at 2.1 per cent.

Providing a quarterly break up, Malhotra said CPI inflation is projected at 3.2 per cent in the fourth quarter of FY2025 to 26, followed by 4 per cent in the first quarter of FY2026 to 27 and 4.2 per cent in the second quarter.

He said underlying inflation pressures remain muted, except for precious metals, where global price movements have led to some volatility. For most other categories, price trends are stable and manageable.

Malhotra added that the RBI will present its full year CPI inflation projection in the April policy review once more data under the new base year series becomes available.

Policy to remain data driven

Looking ahead, Malhotra said monetary policy decisions will continue to be guided by evolving macroeconomic conditions.

“Going forward, the Monetary Policy Committee will be guided by evolving macroeconomic conditions,” he said, citing strong domestic fundamentals even as global uncertainty persists.

The MPC began its deliberations on Wednesday and concluded them on Friday, shortly after the Union Budget 2026 and the announcement of key trade agreements between India and the United States.

RBI announces regulatory measures for banks and customers

The RBI said it will move ahead with a new set of regulatory measures aimed at strengthening customer protection, widening financial inclusion and improving the ease of doing business for non banking financial companies and urban cooperative banks.

Outlining the priorities, the central bank said the focus areas include customer protection, advanced financial inclusion and use based regulation. It also plans steps to promote smoother operations for urban cooperative banks, improve the business environment for non banking financial companies and deepen financial markets with the customer at the centre of policy design.

As part of this initiative, the RBI said it will issue three draft guidelines covering these areas.