In its first monetary policy review of 2026, the Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.25%. This decision, announced by RBI Governor Sanjay Malhotra on Friday, February 6, 2026, comes after a three-day meeting where the committee assessed the current macroeconomic conditions and outlook.
The MPC's decision to maintain the status quo is based on a comprehensive review of domestic macroeconomic conditions. The committee believes that the current policy rate is appropriate, considering the present economic scenario. Consequently, the Standing Deposit Facility (SDF) rate remains at 5%, and the Marginal Standing Facility (MSF) rate and the bank rate stay at 5.5%.
The decision to hold the repo rate steady aligns with expectations, particularly in light of strong economic growth and reduced tariff pressures following India's recent trade agreement with the US. Furthermore, the successful completion of trade deals is expected to positively influence the overall economic outlook.
The global economy has demonstrated remarkable resilience in 2025, supported by factors such as trade front-loading, a milder-than-anticipated impact of tariffs, broad fiscal stimulus, and accommodative monetary policy. While inflation is gradually declining, it remains above target in several advanced economies.
Since the last policy meeting, external headwinds have intensified. Escalating geopolitical friction and rising trade tensions are disrupting the existing world economic order. Inflation outcomes vary across different regions, remaining above target in most advanced economies, leading to divergence in monetary policy actions as central banks approach the end of their current easing cycles.
The MPC has been carefully monitoring inflation, which has remained benign, reaching its lowest level in the current data series in October 2025. Headline inflation during November and December remained below the tolerance band of the inflation target. The revised outlook for CPI inflation in the first and second quarters of the next fiscal year is projected at 4% and 4.2%, respectively, slightly higher than previous estimates.
India's GDP growth has surpassed expectations this fiscal year, and the country is on track to grow at over 7%, maintaining its position as the world's fastest-growing major economy. The Indian economy is currently in a "Goldilocks phase". GDP growth is expected to reach 7.4% in the current financial year.
Since February of last year, the RBI has reduced interest rates by a total of 125 basis points, including a 25-basis point cut in December. Looking ahead, the MPC will continue to be guided by evolving macroeconomic conditions and data from the new series in determining future monetary policy actions.