Summary:
The RBI kept the repo rate unchanged at 5.25% and retained its neutral policy stance, citing rising inflation, global uncertainty, and stable domestic growth. The central bank maintained its FY27 GDP growth forecast at 6.7% while projecting CPI inflation at 5.0% for the year. Borrowing costs and deposit rates remain stable, while investors will closely watch future inflation and policy signals.
However, it should be noted that during the meeting held on August 2026, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) unanimously decided not to change the policy repo rate, keeping it unchanged at 5.25%. Moreover, the central bank did not change its neutral stance and assured that it would observe inflation dynamics, growth in the economy, and the world in order to make decisions further on.
The 62nd MPC meeting of the Reserve Bank of India was conducted under the guidance of RBI Governor Sanjay Malhotra. In addition to keeping the repo rate constant, the central bank decided not to change the Standing Deposit Facility (SDF) rate, which remained at 5.00%, as well as Marginal Standing Facility (MSF) and Bank Rate, which were 5.50%.
India’s Growth Outlook Remains Strong Despite Global Risks
As per the RBI, there is still resilience in domestic economic activity. High-frequency data points to stable private consumption, positive developments in investment and higher exports of services in Q1FY27. The merchandise exports have also witnessed improvements.
The central bank stated that capacity utilisation being high, credit growth remaining strong and the government’s continued efforts towards infrastructure development will support the investment activity.
As per MPC, India's real GDP growth rate is estimated to be 6.7% in FY27. The growth is expected to be 7.0%, 6.4%, 6.5%, and 6.8% in Q1, Q2, Q3, and Q4 respectively. The GDP growth for Q1FY28 is expected to be 7.3%.
But as per RBI, the risks are from an uneven monsoon season, effect of El Niño, global trade challenges, geopolitical concerns, and volatile crude oil prices.
Read About: RBI Repo Rate pause faces Inflation Test
Inflation Rises, But RBI Sees Supply-Side Pressure
Inflation in retail basket stood at 4.4% in June 2026, primarily on account of rise in food and fuel costs. The increase was approximately 30 basis points below the RBI's previous estimate for Q1FY27, signaling lack of transmission from cost pressures.
Core inflation remained unchanged at 3.9% for May-June 2026, and core inflation without precious metals stood at 2.3%-2.5%. It is reported that inflationary pressures on the demand side are well-contained.
For FY27, the RBI estimated CPI inflation at 5.0%, Q2 inflation at 4.7%, Q3 inflation at 5.9% and Q4 inflation at 5.5%. Inflation will peak in Q3 and then ease back. For FY28, CPI inflation will stand at 5.3%.
Headline inflation will be mostly supply-driven as per expectations of the MPC, without broad-based demand pressure. Core inflation will match the 4% target by year-end.
Impact on Borrowers, Depositors and Investors
Since the repo rate has remained constant, it can be stated that there will be no immediate change in the EMI of home loan, vehicle loan, or business loan with floating rate. It seems that the cost of borrowing will remain stable until RBI gains more confidence about the decline in inflation rates.
Fixed deposit investors are currently enjoying the existing interest rate scenario since banks cannot reduce deposit rates instantly. Also, debt mutual fund investors are monitoring future policy moves since a cut in interest rates will favor long-duration bond funds.
Stock Market Reaction: Why Stocks Moved After RBI Policy
The move made by the RBI had a mixed effect on the rate sensitive stocks since the policy result had already been anticipated by the investors. Banking stocks, real estate stocks and infrastructure stocks still remained in the center stage since their performance depends on the interest rate anticipation.
A neutral move gave stability to the stock markets but lacked a new trigger that would help start a stock market rally. The policy showed that the RBI is working on keeping the balance between promoting economic growth and controlling inflation.
The prediction of 6.7% growth in GDP of India and the belief that inflation will be demand driven were among the factors that boosted the overall market sentiments. Still, uncertainty in the situation in the international market, crude oil prices and inflationary situation prevailed.
By being neutral, the RBI still has space to act in the future.
