The Monetary Policy Committee kept key interest rates unchanged at its August meeting.
RBI projected FY27 GDP growth at 6.7% and inflation at 5%.
Highlights
- RBI kept the repo rate unchanged at 5.25%.
- The Monetary Policy Committee retained its neutral stance.
- SDF rate remained at 5%, while MSF and bank rate stayed at 5.5%.
- RBI projected India’s FY27 GDP growth at 6.7%.
- CPI inflation for FY27 is estimated at 5%.
- Food prices, fuel costs, global oil volatility and El Niño remain key risks.
The Reserve Bank of India’s Monetary Policy Committee kept the repo rate unchanged at 5.25% at its August 2026 policy meeting, choosing to remain cautious amid uncertainty over inflation, global trade and energy prices.
RBI Governor Sanjay Malhotra announced the decision after the three-day meeting held between August 3 and August 5. The six-member committee also retained its neutral policy stance, giving the central bank flexibility to respond to future inflation and growth developments.
Other key policy rates were also left unchanged. The Standing Deposit Facility rate remained at 5%, while the Marginal Standing Facility rate and the bank rate were maintained at 5.5%.
The RBI said underlying inflation pressures have remained under control for some time. However, headline inflation is expected to rise in the near term and may peak during the third quarter of the financial year, mainly due to higher food and fuel prices.
The central bank projected CPI inflation at 5% for FY27. Its quarterly inflation estimates stand at 4.7% for the second quarter, 5.9% for the third quarter and 5.5% for the fourth quarter.
The RBI warned that uncertain rainfall patterns linked to El Niño, volatile global crude oil prices and geopolitical tensions could affect the inflation outlook. It also highlighted the risk that higher food, fuel and input costs could spread to other goods and services.
On economic growth, the RBI projected real GDP expansion of 6.7% for FY27. Growth is expected at 7% in the first quarter, 6.4% in the second quarter, 6.5% in the third quarter and 6.8% in the fourth quarter.
According to the RBI Governor, strong domestic demand, manufacturing and services activity, private consumption and export performance continue to support the economy. He said the Indian economy performed better than expected in the first quarter.
However, the central bank remains concerned about renewed geopolitical tensions, higher energy-price volatility and uncertainty surrounding global trade policies. The RBI said it needs greater clarity on the direction and composition of inflation before taking further policy action.
The central bank also announced plans to issue draft guidelines for restarting the licensing of urban cooperative banks. It will review the credit-monitoring framework for rural cooperative banks and standardise rules related to interest rates on advances across regulated institutions.
The next RBI Monetary Policy Committee meeting is scheduled to be held from October 5 to October 7, 2026.
