RBI Keeps Repo Rate Unchanged at 5.25%, Maintains Neutral Policy Stance

The RBI on August 5 left the repo rate steady at 5.25% for a fourth consecutive monetary policy meeting. The Monetary Policy Committee (MPC) has also stuck to its neutral approach due to uncertainties pertaining to global economic trends and other factors.

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Following the unanimous decision of the six-member MPC, the Standing Deposit Facility (SDF) rate remains at 5.00%, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50%.

RBI Revises FY27 Growth and Inflation Outlook

The central bank raised its FY27 real GDP growth forecast to 6.7% from 6.6% projected in the June policy review. At the same time, it lowered its retail inflation estimate for FY27 to 5.0%, compared with the earlier projection of 5.1%.

Addressing the media after the policy announcement, RBI Governor Sanjay Malhotra said greater clarity on inflation, including its trajectory and composition, is necessary before any policy adjustment is considered. He added that future decisions would depend on evolving growth and inflation dynamics.

The RBI projected real GDP growth at 7.0% for Q1FY27, 6.4% for Q2FY27, 6.5% for Q3FY27 and 6.8% for Q4FY27. Growth for Q1FY28 has been estimated at 7.3%.

On inflation, the central bank expects consumer price inflation at 4.7% in Q2FY27, 5.9% in Q3FY27 and 5.5% in Q4FY27. Inflation for Q1FY28 is projected at 5.3%, while core inflation for FY27 is estimated at 4.3%.

Global Risks Continue to Influence Policy

In his statement, Malhotra said the global economic environment remains uncertain, with elevated energy costs, supply-chain pressures and geopolitical developments continuing to pose risks. He also highlighted concerns over an uneven south-west monsoon and El Niño conditions, which could affect agricultural output and rural demand.

The Governor noted that while headline inflation is expected to rise because of food and fuel-related supply pressures, underlying inflationary trends remain moderate. He said core inflation, excluding precious metals, is expected to soften after peaking during the third quarter.

The RBI had reduced the repo rate by a cumulative 125 basis points during 2025, with the last cut of 25 basis points implemented in December, taking the policy rate to 5.25%. The central bank has maintained the same rate throughout 2026.

FCNR Scheme Sees Strong Dollar Inflows

The RBI also said its Foreign Currency Non-Resident (FCNR) deposit scheme has received encouraging participation. Introduced after the June policy review and operational since June 8, the scheme allows non-resident Indians to place leveraged and unleveraged foreign currency deposits with Indian banks while the RBI absorbs the hedging risk.

According to official data, public sector banks mobilised $8.8 billion, private sector banks attracted $10.7 billion, and foreign banks received $8.4 billion under the scheme. The facility will remain open until the end of September as the central bank continues efforts to strengthen foreign currency inflows and support external sector stability.