The Reserve Bank of India (RBI) has decided to keep the repo rate steady at 5.5%, considering the current domestic and global conditions.
Governor Sanjay Malhotra announced this on Wednesday after the three-day Monetary Policy Committee (MPC) meeting.
He also confirmed that the monetary policy stance will remain neutral, meaning the RBI will stay flexible in changing rates if required.
Key Highlights from RBI Announcement
GDP and Inflation Forecast:
The RBI raised India’s GDP growth forecast from 6.5% to 6.8%, which is a positive sign for the economy, especially after the challenges caused by high US tariffs.
The retail inflation forecast has been cut from 3.1% to 2.6%.
This is the second consecutive time the repo rate has remained unchanged.
Loan Interest Rates:
Since the repo rate is unchanged, there will be no change in housing, vehicle, and other retail loan interest rates for now.
Earlier Rate Cuts:
Between February and June this year, the RBI reduced the repo rate by 1% in total.
This brought down the borrowing cost of new loans by 0.58%.
Economic Outlook and RBI’s Stance
Forex Reserves:
India’s foreign exchange reserves have reached $700.2 billion, enough to cover about 11 months of imports.
Domestic economic activity is expected to stay strong in the second quarter of the current financial year.
Growth Support Measures:
Governor Malhotra mentioned that a better monsoon, lower GST rates, and other policy steps will help keep inflation under control and support growth.
Boost for Investment and Consumption:
The RBI believes that low inflation and easier monetary policy will encourage both investment and consumer spending.
Wait-and-Watch Approach:
For now, the RBI is in “wait and watch” mode, keeping rates steady while monitoring the economy and global developments.
