Daily Updates RBI Keeps Repo Rate Unchanged at 5.25%; Maintains Neutral Policy Stance Adarsh SinghAugust 5, 202609 views Central Bank Retains FY27 GDP Growth Forecast at 6.7% While Flagging Inflation Risks from Food, Fuel and Global Uncertainty The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Wednesday decided to keep the repo rate unchanged at 5.25%, maintaining its ‘neutral’ monetary policy stance as it balances economic growth with evolving inflation risks. The decision was announced by RBI Governor Sanjay Malhotra after the MPC meeting held between August 3 and August 5, 2026. The central bank also left other key policy rates unchanged. The Standing Deposit Facility (SDF) rate remains at 5%, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.5%. RBI Sees Inflation Rising Before Moderating While announcing the policy decision, Governor Malhotra said underlying inflation has remained largely under control and is expected to gradually converge with core inflation by the end of the current financial year. However, he cautioned that headline inflation is likely to rise in the coming quarters, mainly due to higher food and fuel prices. According to the RBI, inflation is expected to peak during the third quarter of FY27 before easing later in the financial year. The central bank projected Consumer Price Index (CPI) inflation at 5% for FY27. Quarter-wise Inflation Forecast Q2 FY27: 4.7% Q3 FY27: 5.9% Q4 FY27: 5.5% Governor Malhotra highlighted that the possible impact of El Niño on rainfall distribution remains one of the biggest domestic risks to inflation. He also pointed to volatile global crude oil prices, driven by geopolitical tensions, as another major factor clouding the near-term inflation outlook. Although broad-based inflationary pressures remain contained, the RBI warned that higher food, fuel, and input costs could eventually translate into wider inflation across the economy through second-round effects. Shah Rukh Khan Tops India’s Most Powerful Celebrity List in 2025 with $177.9 Million Brand Value READ MORE GDP Growth Forecast Retained at 6.7% Despite global uncertainties, the RBI maintained its FY27 real GDP growth forecast at 6.7%. According to the Governor, India’s economy continues to remain resilient, supported by: Strong domestic demand Healthy private consumption Steady manufacturing activity Continued expansion in the services sector Robust export performance He noted that India’s economy performed better than expected during the first quarter of FY27, led by strong discretionary spending by consumers. However, Malhotra also acknowledged that the escalation of geopolitical tensions since early July has increased volatility in global energy prices, creating additional uncertainty for growth. He added that while the Indian economy remains resilient, the outlook has become less certain due to evolving global trade policies and inflation risks, making it necessary for the RBI to wait for greater clarity before considering any policy changes. Quarter-wise GDP Growth Projection Q1 FY27: 7.0% Q2 FY27: 6.4% Q3 FY27: 6.5% Q4 FY27: 6.8% No Immediate Rate Action Expected By retaining both the repo rate and the neutral stance, the RBI signaled that it is likely to remain data-dependent over the coming months. The central bank indicated that future policy decisions will largely depend on the trajectory of inflation, particularly food and fuel prices, along with developments in global commodity markets and international trade. The next MPC meeting is scheduled to take place between October 5 and October 7, 2026. RBI Announces Measures for Cooperative Banks Alongside the monetary policy announcement, the RBI also unveiled several regulatory initiatives aimed at strengthening India’s cooperative banking sector. The Governor announced that the central bank will issue draft guidelines for restarting the licensing of Urban Cooperative Banks (UCBs) after incorporating feedback received on its earlier discussion paper. The RBI will also release draft directions after conducting a comprehensive review of the credit monitoring framework for rural cooperative banks, which was last updated in 2008. Additionally, the central bank plans to harmonize and standardize regulations governing interest rates on advances across all regulated financial entities. These measures are expected to improve regulatory consistency while strengthening governance across the cooperative banking ecosystem. Expert View Commenting on the policy decision, Vivek Iyer, Partner Financial Services Risk Advisory at Grant Thornton Bharat, said food and fuel inflation will continue to remain the biggest variables influencing future monetary policy decisions. He added that the government’s fiscal measures in managing these sectors provide the RBI greater flexibility to focus on supporting economic growth through monetary policy. Outlook The RBI’s latest policy reflects a cautious approach amid a complex macroeconomic environment. While domestic demand, manufacturing, and services continue to support economic growth, rising food prices, volatile crude oil markets, geopolitical tensions, and uncertain global trade conditions remain key risks. By keeping the repo rate unchanged at 5.25% and maintaining a neutral stance, the central bank has chosen to closely monitor inflation trends before taking any further monetary policy action.