RBI may maintain status quo in February policy, liquidity measures to be in focus

Reserve Bank of India

• RBI likely to maintain status quo on rates in February policy review
• Focus expected on liquidity infusion to anchor money market yields
• MPC to assess upcoming CPI and GDP data before any rate changes

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The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) is expected to maintain a status quo in the February monetary policy, but focus in the policy will be on the liquidity infusion measures to anchor money market yields, economists have said.

The rate-setting panel is likely to draw comfort from the higher growth and inflation averaging around the medium term target of 4 percent. Economists also said that the RBI will be in wait and watch mode in this policy to assess the upcoming CPI (for Jan 2026 on Feb 12; base: 2024) and GDP (FY2024-FY2026 on Feb 27; base: 2022-23) data as per the new base years.

“Notwithstanding the contours of the Union Budget, ICRA believes that a pause is warranted at the current juncture to assess the upcoming CPI (for Jan 2026 on Feb 12; base: 2024) and GDP (FY2024-FY2026 on Feb 27; base: 2022-23) data as per the new base years, which are due to be released at mid/end-February 2026,” said Aditi Nayar, Chief Economist at ICRA.

Further, Gaura Sengupta, Economist at IDFC First Bank said focus will be on liquidity infusion as system liquidity continues to remain low as government cash surplus remains high and drain from foreign exchange intervention persist.

Moneycontrol’s poll before budget

The current estimate on the rate action is in line with the Moneycontrol’s poll which was conducted ahead of the Union Budget 2026, wherein a majority of economists, treasury heads and market participants said the central bank may maintain status quo on rates.

The MPC is set to meet from February 4 and February 6 for its last bi-monthly policy review for this fiscal.

Since February, 2025, the MPC has reduced the repo rate by 125 bps to aid growth, with a 25 bps cut each in February and April, 50 bps in June, and 25 bps in December. The MPC kept the repo rate unchanged in August and October monetary policy.

The central bank will stick to its “neutral” stance and keep its tone dovish in the upcoming policy, experts said. This tone is targeted at lowering interest rates to increase spending and lending, as well as giving a boost to growth.

May address liquidity concerns

The central bank is expected to address the liquidity concerns in the upcoming monetary policy review considering the higher rates on the short-term and long-term money market instruments.

“The bigger ask is the reiteration of confidence building on liquidity. This can help not just to anchor short term rates but also longer term bonds that have seen an increase in pressure post the high gross borrowing print for FY27,” said Sakshi Gupta, Economist at HDFC Bank.

The liquidity in the banking system has remained a problem in last few months, which led to RBI to infuse durable liquidity to the banking system to align overnight rates with the repo rate.