RBI holds fire as oil shock clouds outlook
Rate steady at 5.25% amid global uncertainty | Iran ceasefire taken into account for policy decision
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Mumbai: The Reserve Bank of India (RBI) on Wednesday kept the repo rate unchanged at 5.25%, maintaining a neutral stance as it assesses the fallout of the West Asia conflict on inflation and growth.
RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has adopted a cautious “wait-and-watch” approach amid rising global uncertainties. The six-member panel voted unanimously to hold rates.
While India’s macroeconomic fundamentals remain strong, Malhotra warned of “increased upside risks” to inflation from elevated crude oil prices, weather disruptions and geopolitical tensions. He noted that any disruption in energy supplies, especially through the Strait of Hormuz, could impact both inflation and growth.
High-frequency indicators point to sustained economic momentum, driven by robust consumption and steady investment. However, global headwinds may weaken external demand and remittances.
Other policy rates remain unchanged, with the Standing Deposit Facility at 5% and the Marginal Standing Facility and bank rate at 5.5%. The RBI also cautioned that rising oil prices could widen the current account deficit, though government measures may help stabilise supply chains. The central bank estimates inflation at 4.6% for 2026-27, within the 2–6% target band. On policy transmission, Malhotra said banks have passed on about 90 basis points of rate cuts on loans, adding recent forex measures were temporary steps to curb rupee volatility.
