RBI MPC 2026: Why Malhotra and Co left rates unchanged?

The Reserve Bank of India kept interest rates unchanged in its first policy decision after the Middle East crisis began, as it deals with a weaker rupee while aiming to support economic growth.

The central bank’s six-member Monetary Policy Committee voted unanimously to keep the benchmark repurchase rate at 5.25%, matching all economist estimates in a Bloomberg survey. The policy stance was retained at neutral.

All ⁠six members of the rate panel, which includes three central bank officials and three external appointees, voted to hold rates. The MPC also decided to continue with the "neutral" stance.


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Why RBI kept repo rate unchanged?

RBI decision reflects a wait-and-see approach as Iran-US tensions weighs on India’s energy supplies and growth outlook. The rupee’s slide since the start of the conflict has emerged as the RBI’s primary concern and drawn much of its focus in recent days.

Since the last policy ⁠meeting, geopolitical ‌uncertainties have risen, RBI governor Sanjay Malhotra said while announcing the policy decision. While inflation remains in check, ⁠upside risks have risen and the possibility of second round effects renders the outlook uncertain, he said.

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High frequency indicators suggest growth momentum remains robust but the war in the Middle East is likely to impact this momentum, the governor said.

India's economy was forecast to grow by more than 7% in the fiscal year that began on April 1, ‌according to government estimates, while inflation was expected to remain close to the central bank's target of 4%.

But a sharp rise in oil ⁠prices since the outbreak of conflict between Iran and U.S. and Israel is expected to bring down growth sharply and spur inflationary pressures.

The concerns have been reflected in the financial markets, with equities and bond benchmarks declining and the rupee hitting a record low since the war began at the end of February.