RBI holds repo rate steady at 5.5% amid economic challenges and adjusts GDP growth forecast

The Reserve Bank of India (RBI) Wednesday expectedly kept the policy repo rate unchanged at 5.5% due to tariff-induced challenges, saying policymakers needed time to assess the combined impact of both monetary and fiscal measures on growth and consumption.

But the RBI acknowledged the current macroeconomic conditions and pricing outlook have opened up the policy space for further supporting growth. The central bank revised upward its GDP growth estimate for FY26 to 6.8% from 6.5%, but underscored barriers in the shape of potential losses to export revenues.

“Growth continues to be below our aspirations. Even though the growth projection for the current financial year is being revised upwards, the forward-looking projections for Q3 and beyond are expected to be slightly lower than projected earlier, primarily due to trade related headwinds, despite being partially offset by the impetus provided by the rationalisation of GST rates,” Governor Sanjay Malhotra said.


He also announced a slew of measures for banks and financial institutions, causing banking stocks to surge. Prominent measures include allowing Indian banks to finance corporate acquisitions for the first time ever, deferring by a year the start of the expected credit loss (ECL) framework from April 2027, and introduction of new Basel III norms from April 1 2027, with lower requirements for MSMEs and residential home loans.

Banks will also have a glide path until 2031 for total adherence to the ECL norms.

The central bank will also remove regulatory restrictions on overlap of business for banks and give licences to start new urban co-operative banks for the first time since 2004. The RBI said it would also reduce risk weights to operational infrastructure projects, allowing NBFCs to lend to these projects.

Malhotra announced a total of 22 measures, which he said are aimed at strengthening the resilience and competitiveness of the banking sector, improve flow of credit, promote ease of doing business, simplify foreign exchange management, enhance consumer satisfaction, and internationalise the rupee.