RBI Keeps Repo Rate Unchanged at 5.25% in First Policy of FY27
RBI Governor Sanjay Malhotra said that the Monetary Policy Committee unanimously voted to maintain the policy repo rate under the liquidity adjustment facility at 5.25 per cent
Mumbai: Amid global uncertainty triggered by the West Asia conflict, the rate-setting panel i.e the Monetary Policy Committee(MPC) of the Reserve Bank of India (RBI) on Wednesday kept interest rates unchanged and maintained a neutral stance. The repo rate or the rate at which the central bank lends short-term money to commercial banks also remained unchanged at 5.25 per cent. The decision comes after three-day deliberations by six member MPC that began on April 6.
For home loan borrowers, a status quo on rates signals stability. Since home loans are linked to benchmarks such as the repo rate, an unchanged policy rate means your Equated Monthly Instalment will remain steady in the near term as banks are expected to hold lending rates, unless there is a material shift in liquidity conditions.
Hours before the MPC announced its decision, the United States and Iran agreed to a two-week ceasefire, including immediate opening of the Strait of Hormuz, which sent crude crashing below $100 a barrel and lifted markets across Asia. However, there remains continuing uncertainty on the path and duration of the conflict, and its impact on the domestic economy.
Speaking to reporters at the Monetary Policy press conference, Sanjay Malhotra, governor RBI said before the outbreak of the West Asia conflict, India’s macroeconomic fundamentals reflected strong growth and low inflation. However, conditions turned adverse in March as the war intensified. Despite these challenges, India’s economic fundamentals remain strong and are better positioned compared to previous crisis periods and many other economies, providing resilience against global shocks, said Malhotra.
The governor cautioned that upside risks to inflation are rising, driven by geopolitical uncertainties, elevated energy prices, and emergence of El-Nino conditions that could push up food prices. While food inflation has shown some uptick, core inflation pressures remain relatively subdued, he added.
Malhotra said that the central bank "can keep rates low in the near to medium term” adding the resilience of the Indian economy forms a strong case for low rates for nearly 9-12 months owing to strong macroeconomic fundamentals.
The Committee projected real Gross Domestic Product (GDP) growth to slow to 6.9 per cent in fiscal 2027 from 7.6 per cent in the previous year, with risk tilted to the downside. Part of this growth moderation is also due to a high base from fiscal 2026. On the other hand, it projected inflation based on the Consumer Price Index (CPI) to rise to 4.6 per cent for fiscal 2027 with upside risks. The current CPI and growth projections are based on average crude at $85/bbl.
The RBI has already cut the repo rate by a cumulative 125 basis points since February 2025. In its previous monetary policy the central bank maintained a status quo on repo rates.
Malhotra also downplayed concerns on remittances due to the war. "Our remittances actually come from a rather diverse set of regions in which the share of the Gulf countries has declined over time." However, he cautioned that "weaker global growth prospects could dampen external demand and reduce remittance flows."
He also calmed the markets stating that the RBI would be proactive and preemptive in liquidity management and ensure sufficient liquidity in the banking system to meet the productive requirements of the economy.
The governor on a question on the sudden resignation by HDFC Bank's part time chairman Atanu Chakraborty citing that his values and ethics were not in congruence with those of the bank, said that the RBI did not find any material concern at HDFC Bank and added that the overall banking system remained resilient.
