Moneycontrol Pro Panorama | RBI stays put, but don’t miss the signalling  

The RBI doesn’t see immediate danger from inflation and is optimistic on growth.

Dear Reader, 

For those who expected fireworks, today’s monetary policy announcement was a bit of a disappointment. Yet, there is more than meets the eye when one reads between the lines.

The Reserve Bank of India’s October policy decision earlier today may look like a hold, but it contains a clear message: inflation has eased meaningfully, growth remains resilient, and policy space is being preserved for when the global environment turns volatile.

As my colleague Aparna Iyer wrote in her piece, while today’s policy did not gift a rate cut, it made up for that with an adequately dovish slant in its language and indications.

Look at the data. The RBI doesn’t see immediate danger from inflation and is optimistic on growth. That’s a sweet spot for any central bank to be in and provides a good position to cut rates again.

The RBI cut its FY26 consumer inflation forecast to 2.6 percent, from 3.1 percent earlier. That sharp downgrade is a statement of confidence in disinflation holding firm.

Growth, meanwhile, was revised upwards to 6.8 percent for FY26 from 6.5 percent earlier. This affirms India’s status as the fastest-growing large economy.

That said, nuance matters: the first-quarter GDP growth projection for FY27 was nudged down to 6.4 percent from 6.6 percent, reflecting caution about momentum in the outer quarters. Equally important is Governor Sanjay Malhotra’s language. His assertion that “policy space remains open to support growth” is a deliberate signal.

Thus, the RBI is not just resting on the repo rate — It is highlighting its toolkit beyond the policy rate.

What else was there on the plate?

Beyond the rate decisions, the October review unveiled a series of regulatory and developmental measures that show the central bank’s pro-growth tilt.

These include steps to ease foreign exchange rules, boost infrastructure financing, draft guidelines for new universal bank licences, push for rupee internationalisation, and relax lending norms against shares and financial instruments.

If one looks at the big picture, these moves make it clear that the RBI’s support for growth isn’t confined to monetary easing. The broader strategy seems to be to ensure credit and financial resources keep flowing — whether through banks or markets.

Malhotra underlined this when he noted that even if bank loan growth softens, the overall flow of financial resources remains robust.

That’s a dovish message, even without an immediate rate cut. My colleague Neha Dave writes that by holding rates pat in its October policy, the RBI has effectively kept its options open.

It’s a wait and watch game

On liquidity, the central bank chose not to add fresh measures. The 75-basis-point CRR cut already announced is still working its way through the system, and government cash balances are improving.

The RBI’s restraint here signals a preference to let existing measures (read earlier rate actions) play out before adding more liquidity fuel.

What do markets think?

Bond investors hoping for a dovish tilt may be disappointed by the lack of rate action, but the lower inflation trajectory and the policy space hint should temper that.

The rupee, under pressure from a strong dollar and trade worries, could find stability in the RBI’s cautious tone.

On the other hand, equities will take comfort from the growth upgrade and the regulatory pro-growth push, though valuations will keep investors watchful.

And, what about borrowers?

Lending rates will remain unchanged for now. But the broader signal is that the rate cycle has peaked and, when conditions permit, the next move is likely downwards.

For corporates weighing capex plans and households planning mortgages, the October stance offers confidence.

To sum up, the October policy was not about rates but more about setting the right policy narrative and send the right signalling to the market.

Also, read today’s Chart of the Day which discusses the RBI’s inflation dilemma.

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Dinesh Unnikrishnan
Moneycontrol Pro