In a much-anticipated move, the Reserve Bank of India (RBI) has chosen to maintain the policy repo rate at 5.50%, signaling a pause in the current monetary easing cycle. The decision, taken during the 56th meeting of the Monetary Policy Committee (MPC), reflects a “wait and watch” strategy amidst evolving domestic and global economic conditions.
The meeting was chaired by Shri Sanjay Malhotra, Governor, Reserve Bank of India. The following MPC members were in attendance, Dr. Nagesh Kumar, Director & CEO, ISID, Shri Saugata Bhattacharya, Chief Economist, Axis Bank, Prof. Ram Singh, Professor, Delhi School of Economics, Dr. Poonam Gupta, Director General, NCAER, Dr. Rajiv Ranjan, Executive Director, RBI.
Together, they unanimously voted to keep the repo rate unchanged and maintain a neutral policy stance, citing mixed inflation signals, resilience in domestic growth, and persistent global uncertainties.
“A very wise decision by the RBI MPC on keeping the interest rate unchanged and the stance neutral,” said Vivek Iyer, Partner and Financial Services Risk Leader, Grant Thornton Bharat. “Given that the external situation is still evolving and the monetary policy transmission is still underway, the market should look at this call as a balanced call instead of trying to categorise it as a hawk or a dove.”
Inflation Drops, But Risks Remain
India’s CPI inflation dropped to a 77-month low of 2.1% in June, driven by deflation in food prices and adequate monsoon activity. Food inflation, for the first time since 2019, recorded a negative print. The RBI revised its inflation forecast for FY26 downward to 3.1%, yet cautioned that prices may inch up in the final quarter due to base effects and rising core inflation.
Supporting this view, Dr. Poonam Tandon, Chief Investment Officer at IndiaFirst Life, noted: “The MPC has kept the repo rates unchanged. The inflation numbers have been reduced from 3.7% to 3.1%. Despite global uncertainty, growth is retained at 6.5%. The 10-year G-sec rate increased by 5 bps as the market realised we may be in the last leg of the rate-cut cycle. The Governor also announced T-Bill SIP for retail investors under the RBI Direct platform, a welcome move.”
Offering a fintech-sector perspective, Ashok Mittal, MD & CEO, BillMart Fintech, added: “As mentioned earlier, no change in the repo rate was largely expected. With global uncertainties still unfolding and inflation already trending low, the RBI has chosen to stay steady and play the long game. This approach helps maintain confidence in India’s stable macro environment. While the rate remains unchanged, we hope the focus on liquidity and sectoral support—especially for MSMEs and growth-driven businesses—continues. The momentum of India’s economic story is strong, and policy consistency only adds to it.”
The RBI, while optimistic on growth, retaining its FY26 GDP growth forecast at 6.5%, remains cautious due to tariff-related external threats and uneven industrial performance. The services and agriculture sectors are expected to drive economic activity, while trade and manufacturing may face headwinds.
Monetary Transmission Still in Progress
Since February 2025, the RBI has delivered 100 basis points of cumulative rate cuts, yet the transmission is not fully realised. The MPC believes the real effects of past easing measures will unfold gradually.
“The MPC’s decision to maintain status quo on rates and stance does not have any element of surprise,” said Vinod Francis, General Manager and CFO at South Indian Bank.“It is the right policy decision to ensure price stability in the wake of external headwinds like the proposed 25% US export levy. It’s also prudent for the MPC to wait for the full effect of previous rate cuts before initiating further changes.”
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With global markets still navigating uncertain geopolitical and trade scenarios, the RBI’s move reinforces its commitment to calibrated, data-driven policy. The neutral stance and unchanged rates allow space for further transmission while retaining the flexibility to respond to emerging risks.
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