RBI To Hold Rates, Stance Unchanged

Mumbai: Heightened uncertainty transmitting from the West Asia crisis into India's growth and inflation outlook may compel the Monetary Policy Committee (MPC) of the Reserve Bank of India to hold the benchmark repo rate to 5.25 per cent next week and maintain a neutral stance. The central bank is also likely to announce measures to support liquidity and the rupee. The three-day policy meeting of the MPC (RBI’s rate-setting panel) will begin on April 6.

Globally, a lot has changed since the RBI announced its last policy in February 2026. With the outbreak of the United States-Israel war with Iran, crisis in the Middle East has become a point of concern. Energy infrastructure of major oil-exporting economies has been damaged. Strait of Hormuz is virtually closed. Since the beginning of the war on February 27, 2026, oil prices have risen by 63 per cent to US$ 118/bbl as of March 31 2026 with global central banks preparing for its impact on inflation and growth. India’s 10 year G-Sec yield has gone up by 38 basis points breaching the 7 per cent mark while the rupee has fallen 4.22 per cent breaching past 95 per dollar as foreign investors dumped stocks worth $ 13.6 billion in March alone.

“We expect the RBI to keep the repo rate steady at 5.25 per cent in its April 2026 policy. The stance is also expected to be maintained at neutral, as the central bank is likely to remain vigilant about the evolving situation. The tone will be more cautious than hawkish. We also believe this to be the end of the rate cut cycle, and the RBI will now remain on a prolonged pause. However, there may be measures announced to support liquidity and INR,” said Sonal Bandhan, economist at Bank of Baroda in a report.