Reserve Bank Governor Sanjay Malhotra on Friday announced the Monetary Policy Committee's (MPC) decision on Friday, with the committee keeping the key policy rate unchanged at 5.25%. The pause reflects a cautious stance amid the ongoing West Asia conflict, which poses risks to both inflation and economic growth. The six-member MPC began its three-day policy meeting on Wednesday.
In April, the Reserve Bank left the benchmark policy rate unchanged, opting for a cautious wait-and-watch approach as it evaluated the impact of the West Asia conflict on energy markets, inflationary pressures and economic growth.
"The global environment has deteriorated since the last policy meeting with the conflict lingering amidst a fragile truce. The adverse implications of the extended disruption in supply chains and elevated energy prices are reflected in the moderation of growth and increase in inflation projections from the April policy as discussed above," said Malhotra while announcing the MPC policy decisions.
Repo Rate decisions:
- Repo rate unchanged at 5.25%
- Standing Deposit Facility (SDF) rate retained at 5%
- Marginal Standing Facility (MSF) rate and Bank Rate held at 5.5%
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Growth projections:
| Quarter | GDP Growth Projection (FY27) |
|---|---|
| Q1 (Apr-Jun) | 6.6% |
| Q2 (Jul-Sep) | 6.3% |
| Q3 (Oct-Dec) | 6.5% |
| Q4 (Jan-Mar) | 6.8% |
Quarterly Inflation projections:
| Quarter | CPI Inflation Projection (FY27) |
|---|---|
| Q1 (Apr-Jun) | 4.2% |
| Q2 (Jul-Sep) | 5.1% |
| Q3 (Oct-Dec) | 5.9% |
| Q4 (Jan-Mar) | 5.9% |
| Risks | Evenly balanced |
Forex reserves:
Total reserves as of May 29 stand at $682.3 billion.
Measures to attract dollar inflows
All new issuances of 15-year, 30-year and 40-year government bonds will be a part of Fully Accessible Route
- Bonds under this category are part of three global indexes
- Limits on investment in other government securities will also be removed
- Limits for investments by Non-Resident Indians and Overseas Citizens of India are being increased, and extended to all individual persons residing outside India
- RBI will provide a facility of concessional forex swap for about four months till September 30
- RBI will also incentivise external commercial borrowings, by public sector undertakings
- RBI will allow a similar facility for bearing the full hedging cost till September 30 to banks for raising three to five year FCNRB deposits
- RBI will restore time for realisation for export proceeds to nine months
Global Risks
- The RBI Governor said India remains relatively well-positioned despite global uncertainties, but stressed the need to use the current phase of turbulence to further strengthen the country's economic resilience.
- Malhotra said policymakers should not only address existing challenges but also treat them as an opportunity to enhance resilience and preparedness.
- The Governor flagged the ongoing geopolitical tensions in West Asia, rising energy prices and disruptions in global supply chains as major risks to the global economy.
- Malhotra noted that monetary policy across major economies has turned more cautious as central banks balance the twin objectives of supporting growth and controlling inflation.
- According to governor, several advanced economy central banks may increasingly tilt towards tighter monetary policy amid persistent inflation concerns.
- While global equity markets remain buoyant, driven by optimism over artificial intelligence-led growth, global bond markets continue to face pressure from renewed inflation worries and concerns over debt sustainability.
The next meeting of the MPC is scheduled for August 3 to 5, 2026.
