NEW DELHI: Following a 25 basis point rate cut in December, the RBI has opted to pause its policy rate amid ongoing geopolitical uncertainties.
This marks the first monetary policy review since Finance Minister Nirmala Sitharaman revealed the Budget for FY 2026-27.
During the sixth and final bi-monthly monetary policy meeting of the current fiscal year, RBI Governor Sanjay Malhotra announced that the Monetary Policy Committee (MPC) has decided to maintain the short-term lending rate (repo rate) at 5.25 percent, adopting a neutral stance.
The pause in rate cuts is influenced by the consumer price index (CPI)-based retail inflation, which has remained below the government-mandated lower band of 2 percent for the past four months. The central bank has been directed to keep inflation at around 4 percent, with a permissible margin of 2 percent on either side.
Since February 2025, the RBI has lowered the policy rate by 125 basis points. In December, it reduced the repo rate by 25 basis points, bringing it down to the current 5.25 percent.
Acting on the MPC’s recommendations, the RBI cut the repo rate by 25 basis points in both February and April 2025, followed by a 50 basis point reduction in June, in light of declining retail inflation. However, the central bank paused further cuts in August.
In the last MPC meeting, a 25 basis point reduction was again approved, setting the repo rate at 5.25 percent.
India’s retail inflation fell to a record low of 0.25 percent in October 2025, the lowest since the introduction of the CPI series, while the Indian economy witnessed stronger-than-expected GDP growth of 8.2 percent in the second quarter.
According to government estimates, India’s economy is projected to grow by 7.4 percent in the current financial year.
On a concerning note, the rupee hit a historic low, trading at over 92 against the dollar last week, which may lead to higher import costs and inflationary pressures. The rupee has depreciated approximately 6 percent this calendar year.
