The Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.5%, as decided by its six-member Monetary Policy Committee (MPC) on Wednesday. The committee also kept its policy stance neutral. While the inflation estimate for the financial year 2025-26 has been lowered to 3.1%, the RBI has maintained its economic growth forecast at 6.5% for the current year.
The Monetary Policy Committee’s (MPC) unanimously decided to keep the repo rate unchanged at 5.5 per cent
RBI Governor Sanjay Malhotra said the global environment continues to be challenging. Although financial market volatility and geopolitical uncertainties have abated somewhat from their peaks in recent months, trade negotiation challenges continue to linger, he said.
Domestic growth remains resilient and is broadly evolving along the lines of our assessment. Private consumption, aided by rural demand, and fixed investment, supported by buoyant government capex, continue to boost economic activity, he added.
“The current macroeconomic conditions, outlook and uncertainties call for continuation of the policy repo rate of 5.5 per cent and wait for further transmission of the front-loaded rate cuts to the credit markets and the broader economy. Accordingly, the MPC unanimously voted to keep the repo rate unchanged,” Malhotra said while announcing the policy.
The six-member rate-setting panel also decided to continue with the neutral policy stance.
The MPC meeting was held amid rising uncertainties around trade tariffs and geopolitical tensions, as well as moderation in headline inflation.
RBI’s GDP and inflation projections for FY26
Despite headwinds emanating from prolonged geopolitical tensions and trade-related uncertainties, the RBI maintained the real GDP growth projection at 6.5 per cent for FY26.
“As for the growth outlook, the above normal southwest monsoon, lower inflation, rising capacity utilization and congenial financial conditions continue to support domestic economic activity,” RBI Governor said.
The supportive monetary, regulatory and fiscal policies including robust government capital expenditure should also boost demand, he said.
“Growth has held up well with some pick-up expected in the coming festive season and is evolving in line with our assessment of 6.5 per cent for 2025-26,” Malhotra said.
Prospects of external demand, however, remain uncertain amid ongoing tariff announcements and trade negotiations. “The headwinds emanating from prolonged geopolitical tensions, persisting global uncertainties, and volatility in global financial markets pose risks to the growth outlook,” he said.
The RBI lowered the forecast for consumer price index (CPI) inflation for FY26 to 3.1 per cent compared to the earlier projection of 3.7 per cent.
Malhotra said the inflation outlook for 2025-26 is now better than what was expected in June. This improvement is due to a good monsoon, healthy kharif crop sowing, enough water in reservoirs, and good buffer stocks of food grains.
Headline inflation, measured by the year-on-year change in the all-India Consumer Price Index (CPI), dropped to 2.1% in June 2025 — the lowest since January 2019. In May, it was 2.8%. Retail inflation has stayed below the RBI’s 4% target for five straight months.
Impact on Loan Interest Rates:
Since the RBI has kept the repo rate unchanged at 5.5%, interest rates on loans linked to the external benchmark (like the repo rate) will remain the same. However, banks may still change interest rates on loans linked to the marginal cost of fund-based lending rate (MCLR).