The Monetary Policy Committee (MPC) of the Reserve Bank of India decided unanimously to maintain status quo on the repo rate at 5.25% on February 6 and retained stance at neutral, while acknowledging that external headwinds have intensified since the December 2025 meeting.
The decision comes amid benign inflation and easing worries over US tariffs after budget measures to boost manufacturing and exports, and a trade deal with Washington.
The RBI also maintained a status quo on the standing deposit facility (SDF) at 5%, as well as kept marginal standing facility (MSF) and bank rates at 5.5%. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
External headwinds have intensified but the successful completion of the trade deal with the US augurs well for the economy, Reserve Bank of India Governor Sanjay Malhotra said in his policy statement. Inflation remains beningn, he said.
Announcing the last bi-monthly policy review of FY26 on February 6, 2026, Malhotra said, “Since the last MPC meeting (December 2025), external headwinds have intensified. However, the successful completion of trade deals augurs well for the economic outlook. Overall, the near-term domestic inflation and growth outlooks remain positive.”
The RBI reiterated that its future policy actions will continue to be guided by incoming data and the evolving macroeconomic outlook, with a focus on maintaining price stability while supporting economic growth.
The Reserve Bank of India has cut the repo rate by 125 basis points since February 2025. RBI had cut rates by 25 basis points at its last meeting in December.
The MPC meet took place against the backdrop of falling inflation, rising GDP growth, the rupee crossing 90 against the dollar and ongoing geopolitical tensions.
Foreign exchange reserves stood at $723.8 billion as of January 30, Malhotra said in his policy speech on Friday.
The stockpile rose from $709.4 billion, which was already an all-time high. The reserves provide a merchandise import cover of more than 11 months, Malhotra said.
"Overall, India's external sector remains resilient. We are confident of meeting our external financing requirements comfortably."
RBI has removed the limit of Rs 2.5 lakh crore from investment in debt securities under the voluntary retention route (VRR), the Reserve Bank of India governor said on Friday.
Foreign investors who commit investment in debt for a minimum period of three years fall under the VRR route.
RBI projected inflation for current fiscal year at 2.1%; 4% for Q1 in FY27 and 4.2% in Q2.
RBI revised upwards growth projection for Q1 and Q2 of next fiscal year at 6.9% and 7%, respectively.
The CPI-based headline inflation is ruling below the 2% lower band mandated by the government. Besides, the Indian economy has clocked better-than-expected GDP growth of 8.2% in the second quarter.
The government has mandated the RBI to ensure that retail inflation remains at 4% with a margin of 2% on either side.
RBI will propose a framework to compensate customers up to Rs 25,000 for losses incurred in small-value fraudulent digital transactions, Malhotra said.
The central bank will issue draft guidelines on misselling by lenders and recovery of loans, use of so-called recovery agents and on limiting liability of customers in unauthorised banking transactions, Malhotra said.
The regulator will also publish a discussion paper on measures to enhance the safety of digital payments, he said.
The Reserve Bank of India proposed doubling the limit on collateral-free loans for small enterprises to Rs 20 lakh from Rs 10 lakh. The revised norms will apply to loans sanctioned or renewed from April 1, 2026.
It also said banks would be allowed to lend to real estate investment trusts, subject to prudential safeguards, extending a facility already available to infrastructure investment trusts.
"Upon review and considering the presence of strong regulatory and governance framework for listed REITs, it is proposed to permit commercial banks to extend finance to REITs, subject to appropriate prudential safeguards," the Governor said in his statement.
"The existing guidelines in respect of lending to InvITs are also being harmonised for parity with prudential safeguards proposed for lending to REITs," he added.
Expert View
"The MPC meeting underscores a calibrated approach that balances a resilient domestic growth outlook with a benign inflation environment. Headline CPI remains well below the RBI’s tolerance band of 2–6%, even after a gradual normalization from recent record lows, providing the central bank with policy space to prioritize growth stability. WPI has also turned positive after several months of contraction, led by firming manufacturing prices, signalling a mild pickup in cost pressures but not yet at levels that warrant a shift in the policy stance. Against this backdrop, the MPC’s decision to maintain the policy rate and retain a neutral stance reflects confidence that inflation is contained while growth momentum remains intact.
"On the growth front, the RBI continues to see the Indian economy on a steady and improving trajectory. Real GDP growth for the current year is estimated at around 7.4%, supported by resilient private consumption and sustained fixed investment, while real GVA growth is projected at about 7.3%, driven by strong services activity and a revival in manufacturing. Looking ahead, the RBI has marginally revised up its growth projections for the first half of FY27, with GDP growth expected at 6.9% in Q1 and 7.0% in Q2, highlighting the strength of domestic demand even as external conditions remain challenging.
"From a sectoral perspective, policy continuity is supportive for banking and financial services, as stable rates aid net interest margins and improve visibility on credit growth, particularly for PSU banks with strengthening balance sheets. Rate-sensitive sectors such as housing, automobiles and consumer durables stand to benefit from steady borrowing costs, while manufacturing, capital goods and infrastructure-linked sectors gain from policy predictability and ongoing capex momentum. Services remain the key growth engine, with medium-term support from recent trade agreements. Overall, the MPC’s stance reinforces macro stability, anchoring expectations and supporting a constructive medium-term outlook across sectors," said Anil Rego- Founder and Fund Manager at Right Horizons PMS.
"The RBI’s decision to keep rates unchanged and maintain a cautious, data-dependent stance is a sensible move given lingering global uncertainties. Geopolitical risks, commodity price volatility and uneven global growth continue to cloud the external environment, even as India remains relatively well positioned. Preserving policy flexibility at this stage allows the central bank to respond swiftly should global shocks intensify.
"On the domestic front, the growth engine remains resilient. Consumption trends are intact, services activity is healthy and credit growth continues to support investment momentum. GDP growth expectations remain strong compared with global peers, reinforcing India’s position as one of the more attractive large economies.
"Inflation has edged up partly due to base effects, but it remains within the RBI’s comfort range. The central bank’s emphasis on vigilance is appropriate, particularly in light of risks from food prices, weather patterns and imported inflation pressures. By prioritising stability while keeping a close watch on evolving data, the RBI is signalling its commitment to anchoring inflation expectations without compromising growth.
"Going ahead, markets are likely to focus on liquidity management and incoming inflation prints for cues on the future policy path. Overall, the outcome strikes a balanced note—supportive for investor confidence, constructive for medium-term equity markets, and reassuring for bond investors looking for macro stability," said Divam Sharma- Co Founder and Fund Manager at Green Portfolio PMS
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