RBI Policy Highlights: MPC holds repo rate steady at 5.25%, stance ‘neutral’; growth raised, inflation benign

Sanjay Malhotra, Governor, Reserve Bank of India

• RBI keeps repo rate unchanged at 5.25 percent, maintains neutral stance
• FY26 GDP growth forecast raised to 7.4 percent; inflation seen at 2.1 percent
• New GDP and CPI series to be released soon; FY27 projections deferred

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The Reserve Bank of India on Friday kept the policy repo rate unchanged at 5.25 percent, with the Monetary Policy Committee (MPC) voting unanimously to maintain the status quo and continue with a neutral stance. The RBI MPC cited benign inflation, durable growth momentum and rising external uncertainties. RBI Governor Sanjay Malhotra said the current policy rate remains appropriate for prevailing macroeconomic conditions, while signalling that future actions will remain data-dependent, particularly as India transitions to new GDP and CPI series.

Key highlights from RBI MPC February 2026 policy

Repo rate unchanged; neutral stance retained: The MPC unanimously voted to keep the repo rate unchanged at 5.25 percent and continue with a neutral stance. Malhotra said the committee was of the view that the current policy rate is appropriate given the prevailing macroeconomic backdrop, while preserving flexibility to respond to evolving conditions.

Growth outlook strengthened; FY26 GDP pegged at 7.4 percent: The RBI raised its real GDP growth estimate for FY26 to 7.4 percent, with the Governor saying growth now looks stronger than at the December policy. The economy continues on a steady, improving trajectory, supported by resilient domestic demand, sustained momentum in services, improving corporate performance, high capacity utilisation and a revival in manufacturing activity, aided by continued infrastructure spending.

Inflation remains benign; FY26 projection retained at around 2 percent: The MPC retained its FY26 inflation projection at around 2 percent, with CPI inflation seen at 2.1 percent for FY26 and 3.2 percent in Q4 FY26. Inflation is expected to normalise in FY27, with CPI projected at 4.0 percent in Q1 FY27 and 4.2 percent in Q2 FY27. Governor Sanjay Malhotra said India is at the “same sweet point, or better” on inflation compared with the last policy, adding that core inflation remains range-bound, barring volatility in precious metals.

New GDP and CPI series imminent; FY27 projections deferred: The Governor said new GDP and CPI series will be released “in a few days”. As a result, the RBI has deferred its full-year FY27 growth and inflation projections to the April policy meeting.

Liquidity remains in surplus; pass-through strong: System liquidity remains in surplus, with the RBI reiterating that ensuring ample and sufficient liquidity to meet the productive needs of the economy is a continuous task, not limited to policy actions. Governor Malhotra said the RBI has a range of tools—including short- and long-term VRRs and OMOs -- to manage liquidity, with the immediate objective of keeping overnight rates aligned with the repo rate to ensure smoother transmission across markets. While some hardening in money-market rates was seen after December, transmission so far has been “excellent”, he said.

RBI proposes compensation up to Rs 25,000 for small-value digital frauds: The RBI will introduce a new framework to compensate customers for small-value digital frauds, offering relief of up to Rs 25,000 per case. Governor Malhotra said such frauds account for a small share by value but nearly 65 percent by number involve amounts of Rs 50,000 or less. Compensation will apply even if the customer has inadvertently shared credentials, provided the loss was unintended and not malafide. The framework will involve risk-sharing, with customers and banks each bearing 15 percent, and the RBI covering the balance. Draft guidelines will be issued shortly.

Short-term market rates tightened in January: The Governor reiterated that tightening in CP and CD rates since December reflects cyclical dynamics rather than stress, noting that such movements recur across banking cycles. The RBI’s focus, he stressed, remains system liquidity, not CD ratios.

Bond market, borrowing and yield curve: Addressing bond market concerns, Malhotra said the government’s borrowing programme is manageable and on the lower side, urging markets to focus on net borrowing rather than gross borrowings. He added that higher reliance on Treasury Bills would help manage the yield curve more efficiently and ensure borrowings are raised at reasonable prices.

Strong FDI inflows; forex reserves at USD 723.8 billion: India continues to remain an attractive destination for foreign direct investment, particularly for greenfield projects, Malhotra said. Foreign exchange reserves stood at USD 723.8 billion as of January 30, 2026, providing more than 11 months of import cover and reinforcing resilience to external shocks.

Financial system remains sound; consumer protection push announced: Malhotra said system-level parameters for banks and NBFCs remain sound. The RBI will introduce a framework to compensate customers up to Rs 25,000 for losses from fraudulent transactions. It will also issue a discussion paper to enhance payment safety, including possible transaction limits and additional authentication for vulnerable users.

Trade deals support exports; external sector remains robust: Merchandise exports rose 1.9 percent year-on-year, aided by trade diversification. Malhotra said multiple trade agreements -- including those with the EU, the UK and the US -- augur well for exports and should support the current account, even as he cautioned that spillovers from escalating geopolitical tensions could pose risks to the outlook.

Manufacturing revival, capital flows support growth: The Governor said India’s macroeconomic fundamentals, including the external sector, remain very strong and robust. Improving corporate performance, supportive financial conditions and the government’s infrastructure push are expected to boost manufacturing and investments, while structural reforms and large financial-sector deals are seen aiding capital inflows.