RBI holds repo rate at 5.25% after the Monetary Policy Committee (MPC) unanimously voted to keep the benchmark lending rate unchanged at its meeting held from August 3 to 5, 2026. The Reserve Bank of India also raised its real GDP growth forecast for 2026–27 to 6.7% from 6.6% previously and retained its neutral policy stance.
The decision was announced on August 5, 2026, following the 62nd meeting of the MPC chaired by Reserve Bank of India Governor Sanjay Malhotra. The meeting was attended by Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Poonam Gupta and Shri Indranil Bhattacharyya.
Under the liquidity adjustment facility (LAF), the standing deposit facility (SDF) rate remains unchanged at 5.00%, while the marginal standing facility (MSF) rate and the Bank Rate continue at 5.50%.
RBI Holds Repo Rate at 5.25% as Growth Forecast Improves
The Reserve Bank projected real GDP growth for 2026–27 at 6.7%, with quarterly estimates of 7.0% in Q1, 6.4% in Q2, 6.5% in Q3, and 6.8% in Q4. Real GDP growth for the first quarter of 2027–28 is projected at 7.3%. The central bank said the risks to growth remain evenly balanced.
According to the RBI, the Indian economy has remained resilient despite global headwinds. High-frequency indicators point to steady domestic demand in the first quarter of 2026–27, while private consumption has remained robust. Investment activity continues to be supported by indicators related to construction, capital goods and bank credit.
The central bank also noted that external demand has remained strong, supported by healthy growth in services exports and a rebound in merchandise exports. Sustained momentum in services, continued benefits from GST rationalisation, strong credit growth and the government’s infrastructure push are expected to support economic activity.
However, the RBI said that energy prices and supply-chain pressures remain elevated and uncertain. It also warned that deficient and uneven south-west monsoon conditions amid El Niño continue to pose risks to agriculture and rural demand.
The global economic environment remains volatile, according to the RBI. The central bank highlighted persistent inflation concerns, frequent market swings and changing policy expectations. It also noted that the temporary ceasefire in West Asia quickly dissipated following the resumption of conflict in July, while volatile oil prices and geopolitical developments continue to pose downside risks.
Inflation Outlook Remains Elevated
Headline CPI inflation rose to 4.4% in June 2026 after remaining below the target for sixteen consecutive months. The increase was mainly driven by higher food and fuel inflation, although the reading was 30 basis points lower than earlier projections for the first quarter of 2026–27.
Food inflation pressures broadened during May and June, while fuel inflation increased following the sharp rise in international energy prices. Higher fuel costs also pushed up inflation in categories such as restaurant charges.
Despite these pressures, core inflation excluding food and fuel remained unchanged at 3.9% during May and June. Excluding precious metals, core inflation stood at 2.3%–2.5% during the same period.
The RBI projects CPI inflation for 2026–27 at 5.0%, with quarterly estimates of 4.7% in Q2, 5.9% in Q3, and 5.5% in Q4. Inflation for the first quarter of 2027–28 is projected at 5.3%, while core inflation is expected to average 4.3% during 2026–27.
The central bank said El Niño’s impact on rainfall distribution remains a key risk, although proactive supply management measures and adequate foodgrain stocks could help mitigate the impact.
Summarising its decision, the MPC said inflation pressures are largely being driven by food and fuel prices and have not yet become broad-based. The committee unanimously voted to keep the repo rate unchanged and retain the neutral stance.
The minutes of the MPC meeting will be published on August 19, 2026. The next MPC meeting is scheduled for October 5 to 7, 2026.
