RBI Policy 2026: 5.25% Repo Rate Hold Strengthens India Growth Story

RBI Policy Update: Repo Rate Held Steady at 5.25%

RBI Policy 2026: In its first monetary policy announcement of 2026, the RBI policy decision has come exactly on expected lines—but that doesn’t make it any less significant. The Reserve Bank of India’s Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.25%, signaling a preference for stability as the economy navigates both domestic momentum and global uncertainty.

RBI Governor Sanjay Malhotra, who chaired this policy review soon after the Union Budget 2026-27, sounded measured yet optimistic. His message was clear: India is in a strong position, but caution is still necessary. He highlighted that the Indian economy remains resilient, with inflation under control and growth holding firm despite rising external pressures.

This latest RBI policy review reflects a central bank that wants to give previous rate cuts time to work their way through the system rather than rushing into another move.

Why the RBI Policy Chose to Pause Rates

The decision was unanimous. All six members of the MPC agreed to hold the repo rate at 5.25%. This comes after a 25-basis-point cut in December 2025, which had already injected additional support into the economy.

In simple terms, the RBI is pressing the pause button.

When the central bank cuts rates, it takes time for cheaper borrowing to translate into higher spending, investment, and job creation. By keeping rates steady now, the RBI policy stance allows policymakers to assess:

• How effectively banks transmit earlier rate cuts

• The impact of the Union Budget’s spending push

• Inflation movement after food price corrections

• Global financial market volatility

Alongside the repo rate, other policy rates remain aligned:

• Standing Deposit Facility (SDF): 5.00%

• Marginal Standing Facility (MSF): 5.50%

• Bank Rate: 5.50%

The stance remains neutral, meaning the RBI can move rates up or down depending on future data.

Growth Story Still Strong Under RBI Policy Lens

One of the biggest positives from this RBI policy announcement is the central bank’s confidence in economic growth.

India’s real GDP growth is now projected at 7.4% for FY 2025-26. That’s a strong number, especially considering the fragile global backdrop.

Governor Malhotra pointed to several growth drivers:

• Manufacturing recovery after supply disruptions

• Strong services exports, especially IT and financial services

• Government infrastructure spending

• Urban consumption resilience

• Gradual rural demand improvement

Interestingly, the RBI has also revised growth upward for the coming two quarters. That suggests momentum is not only intact but improving.

For businesses and investors, this part of the RBI policy outlook sends a reassuring signal that India’s expansion cycle is far from slowing.

Global Headwinds Still on the Radar

Even with domestic strength, the RBI isn’t ignoring risks.

Governor Malhotra spoke candidly about “external headwinds” that could influence future RBI policy decisions. These include:

• Commodity price volatility

• Rising or fluctuating US bond yields

• Ongoing geopolitical tensions

• Trade route disruptions

• Currency market instability

However, there is also a silver lining. India has recently concluded major trade agreements with the United States and the European Union. These deals are expected to:

• Boost exports

• Support manufacturing

• Attract foreign investment

• Improve supply chain integration

So while global risks remain, India’s external positioning is stronger than before—something the RBI monetary policy February 2026 review clearly acknowledges.

Inflation: Comfortably Within Target

Inflation remains the backbone of every RBI policy decision, and the latest outlook is encouraging.

The central bank projects CPI inflation at 2.1% for FY 2025-26, well within its tolerance band.

Several factors are helping keep prices stable:

Food inflation has softened thanks to healthy Kharif output and promising Rabi sowing. Adequate grain supply has prevented sharp spikes in essential commodities.

Core inflation—excluding volatile items like gold and silver—remains steady at about 2.6%, indicating underlying price pressures are contained.

Liquidity conditions have also been carefully managed. The RBI maintained system liquidity around ₹75,000 crore, enough to support lending without overheating the economy.

Put simply, inflation is not forcing the RBI’s hand right now, giving policymakers room to prioritize stability.

Beyond Rates: What Else the RBI Policy Announced

Interest rates may grab headlines, but the broader RBI policy review included structural reforms that could have long-term impact.

NBFC and Banking Expansion

To deepen financial inclusion, certain NBFCs will now be allowed to open more than 1,000 branches without prior RBI approval, provided they meet regulatory standards.

Banks are also being permitted to lend to REITs under safeguards—potentially improving liquidity in India’s real estate market.

MSME Credit Boost

Small businesses received a major push. The collateral-free loan limit for MSMEs is proposed to rise from ₹10 lakh to ₹20 lakh.

This step could:

• Improve credit flow to micro-enterprises

• Encourage business expansion

• Support employment generation

Customer Protection Measures

The RBI policy also focused on retail banking safety.

Key proposals include:

• Compensation up to ₹25,000 for small digital fraud losses

• Tighter rules against financial mis-selling

• Regulation of loan recovery practices

This reflects RBI’s growing focus on consumer trust in the financial system.

Forex Reserves and Liquidity Comfort

India’s macroeconomic safety net remains strong.

Forex reserves stood at $723.8 billion by end-January 2026. Such high reserves provide protection against:

• Currency volatility

• Imported inflation

• Sudden capital outflows

Additionally, RBI liquidity operations in recent months have kept money markets stable and credit flowing smoothly.

This financial cushion plays a crucial role in shaping every RBI policy stance.

What This RBI Policy Means for You

For borrowers: Loan rates may not fall immediately, but past cuts will continue transmitting.

For investors: Policy stability supports equities and bonds.

For businesses: Growth optimism and MSME credit expansion are positive signals.

For consumers: Inflation stability protects purchasing power.

In short, this RBI policy is less about dramatic change and more about maintaining balance.

Conclusion: RBI Policy Signals Confidence and Caution Together

The latest monetary announcement shows a central bank walking a careful line. By choosing to hold rates steady, the RBI policy underscores confidence in India’s economic resilience while staying alert to global risks.

With GDP growth projected at 7.4%, inflation near 2.1%, strong forex reserves, and fresh financial sector reforms, the broader outlook remains constructive. The pause gives time for earlier rate cuts and fiscal measures to play out fully.

As markets digest global developments and domestic reforms, one message stands out clearly in this RBI policy review—stability today is the foundation for sustained growth tomorrow. And for now, the RBI policy remains firmly focused on balancing inflation control, financial stability, and India’s long-term growth momentum.