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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, kept the benchmark repo rate unchanged at 5.25% following its bi-monthly review held from August 3 to August 5, 2026. This marks the fourth consecutive policy review in which the RBI has chosen to hold rates steady, and the committee retained its ‘neutral’ policy stance.
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What the MPC Decided: Key Rates at a Glance
| Rate | Level |
| Repo Rate | 5.25% |
| Standing Deposit Facility (SDF) | 5.00% |
| Marginal Standing Facility (MSF) | 5.50% |
| Bank Rate | 5.50% |
The repo rate is the rate at which the RBI lends short-term money to commercial banks, while the SDF is the rate at which banks can park surplus funds with the RBI without collateral. The MSF, by contrast, is the rate at which banks can borrow overnight funds from the RBI against government securities when they’re short on liquidity, and the Bank Rate is the rate at which the RBI provides long-term funds to banks. Together, this corridor, with SDF at the floor, repo in the middle, and MSF/Bank Rate at the ceiling, sets the boundaries within which short-term interest rates in the economy move, ultimately influencing lending rates across banks, NBFCs, and housing finance companies.
Why the RBI Chose to Hold Rates
Governor Malhotra said the committee wanted “greater clarity” on the inflation outlook before taking any policy action. While headline inflation has moved above the 4% target, he noted this was largely driven by food and fuel prices, with little sign of broader price pressures spreading across the economy. The RBI expects headline inflation to peak in the October-December quarter before easing.
At the post-policy press conference, Malhotra described the central bank’s approach as “neither dovish nor hawkish,” adding that future decisions would be guided by how growth and inflation evolve.
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Growth and Inflation Forecasts Revised
The MPC made modest revisions to its FY27 projections:
- GDP growth forecast: raised to 6.7% from 6.6%
- CPI inflation forecast: lowered to 5% from 5.1%
Key Risks Flagged by the Central Bank
The MPC pointed to several global and domestic factors that could weigh on growth and prices going forward, including:
- Renewed tensions in West Asia
- Volatile crude oil prices
- An uneven southwest monsoon amid El Niño conditions
- Global trade uncertainty
The decision to hold rates was unanimous, coming amid global uncertainty and volatility linked to the ongoing conflict in West Asia.
Market and Industry Reaction
Anil Bamboli, Head of Fixed Income at HDFC Asset Management Company, called the policy a “prudent and calibrated approach,” noting that despite heightened external risks, India’s growth remains resilient and inflation shows no signs of broad-based pressures. He added that the response to recent government and RBI measures to attract capital flows has been encouraging.
What This Means for Borrowers
With rates unchanged, home, auto and personal loan EMIs will stay steady in the near term; a welcome breather for households managing tight budgets. The next monetary policy meeting is scheduled for October 5–7, 2026.
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