NEW DELHI: The Monetary Policy Committee (MPC) unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, citing a stable inflation outlook and sustained growth momentum in the Indian economy despite heightened global uncertainties.

Consequently, the Standing Deposit Facility (SDF) rate remains at 5.00 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.50 per cent. The MPC also retained its neutral monetary policy stance, signalling a data-dependent approach going forward.

Announcing the first bi-monthly policy of 2026, the Reserve Bank of India noted that the Indian economy remains resilient amid escalating geopolitical tensions and rising trade frictions globally. Inflation continues to stay below the tolerance band, while high-frequency indicators point to strong growth momentum in the second half of 2025-26 and beyond.

The RBI highlighted that recent landmark trade agreements with the European Union, along with a prospective trade deal with the United States, are expected to support growth over the medium term.

Headline CPI inflation remained below target during November–December 2025. Inflation projections for Q1 and Q2 of 2026-27 have been placed at 4.0 per cent and 4.2 per cent, respectively. The marginal upward revision is attributed mainly to higher prices of precious metals, while underlying core inflation pressures remain muted.

For 2025-26, CPI inflation is projected at 2.1 per cent, with Q4 inflation expected at 3.2 per cent, reflecting unfavourable base effects.

The RBI projected real GDP growth at 7.4 per cent in 2025-26, supported by strong private consumption, fixed investment, and a robust services sector. Growth in real Gross Value Added (GVA) is estimated at 7.3 per cent.

For Q1 and Q2 of 2026-27, GDP growth projections have been revised upward to 6.9 per cent and 7.0 per cent, respectively. Full-year projections will be announced in April following the release of the new GDP series.

India’s external sector remains resilient, with robust services exports and steady remittance inflows expected to keep the current account deficit at sustainable levels. Foreign exchange reserves stood at US$ 723.8 billion as of January 30, 2026, providing over 11 months of import cover.

System liquidity remains in surplus, and the RBI reiterated its commitment to proactive liquidity management to ensure smooth monetary policy transmission.

The RBI announced several additional measures aimed at strengthening financial stability and inclusion, including:

Customer protection frameworks, including compensation of up to Rs. 25,000 for small-value digital frauds

Increase in collateral-free MSME loan limit from Rs. 10 lakh to Rs. 20 lakh

Permission for banks to lend to REITs with safeguards

Launch of Mission-SAKSHAM to strengthen Urban Cooperative Banks

Regulatory easing for certain NBFCs to improve ease of doing business

Removal of the investment cap under the Voluntary Retention Route (VRR)

Proposal to introduce derivatives on corporate bond indices

The MPC stated that future policy actions will be guided by evolving macroeconomic conditions and incoming data, especially in light of the upcoming new CPI and GDP series.

Overall, the central bank struck an optimistic tone, expressing confidence in India’s growth prospects while remaining vigilant to global risks.