RBI Keeps Repo Rate Unchanged at 5.25 Percent, Maintains Neutral Stance

Policy Decision Reflects Benign Inflation and Easing Growth Concerns​

The Reserve Bank of India on Friday kept its benchmark interest rate unchanged, aligning with expectations as inflation remained manageable and growth concerns eased. The assessment follows increased government spending in the Union Budget and reduced tariff pressures after a trade agreement with the United States.

The central bank’s six member Monetary Policy Committee voted unanimously to retain the repurchase or repo rate at 5.25 percent. The RBI also maintained its neutral policy stance, signalling that rates are likely to remain on hold for now.

External Developments and Trade Relief Support Outlook​

Earlier this week, US President Donald Trump announced a reduction in tariffs on Indian goods to 18 percent from 50 percent, easing a key pressure point on India’s economy and financial markets.

Announcing the MPC’s decisions, RBI Governor Sanjay Malhotra said external headwinds have intensified, but the successful completion of the trade deal with the United States bodes well for the economy.

Rate Cuts Since 2025 and Current Macroeconomic Assessment​

The RBI has reduced policy rates by a cumulative 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. The central bank cut rates by 25 basis points at its previous meeting in December.

While inflation remains benign, economic activity continues to show resilience. Inflation is expected to average close to 2 percent in the current financial year, well below the central bank’s 4 percent target. GDP growth for the current fiscal year ending March 31 is forecast at 7.4 percent.

The RBI raised real GDP growth projections for the first two quarters of the next fiscal to 6.9 percent for April to June and 7 percent for July to September, while deferring the full year projection to April as the new GDP series will be released later this month.

Trade Agreements and Medium Term Growth Momentum​

The governor noted that with a landmark trade agreement with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period despite heightened geopolitical tensions and uncertainty.

Additional Regulatory and Developmental Measures Announced​

Alongside the policy decision, the RBI announced several regulatory initiatives:

• Issuance of three draft guidelines covering mis-selling, loan recovery practices including recovery agents, and limiting customer liability in unauthorised electronic banking transactions.
• Proposal to introduce a framework to compensate customers up to Rs 25,000 for losses in small value fraudulent transactions.
• Release of a discussion paper on enhancing the safety of digital payments, including measures such as lagged credits and additional authentication for specific user groups like senior citizens.

To support credit flow and financial inclusion:

• The limit for collateral-free loans to MSMEs is proposed to be doubled to Rs 20 lakh.
• Banks may be allowed to lend to REITs to promote financing to the real estate sector.
• Certain NBFCs without public funds or customer interface and with asset size up to Rs 1,000 crore are proposed to be exempted from registration requirements.
• The requirement for some NBFCs to obtain prior approval to open more than 1,000 branches is proposed to be removed.

Measures for Financial Markets​

For financial markets, the RBI proposed removing the Rs 2.5 lakh crore cap on investments under the Voluntary Retention Route (VRR). Investments through the VRR will continue to be subject to category-wise limits applicable under the General Route.

The central bank reiterated its commitment to supporting growth while preserving financial stability, stating that benign inflation provides the leeway to remain growth supportive amid a challenging global environment.