PTC Web Desk:  The Reserve Bank of India (RBI) on Friday left the benchmark repo rate unchanged at 5.25 per cent in its second monetary policy review of the financial year, offering relief to borrowers as lending rates and loan EMIs are unlikely to see an immediate increase.

Announcing the decisions of the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said the central bank has opted to maintain the current policy rate while closely monitoring evolving domestic and global economic conditions.

Inflation outlook revised upward

While retaining the repo rate, the RBI revised its inflation projection for FY27 upward to 5.1 per cent from the earlier estimate of 4.6 per cent. The revision reflects concerns over global uncertainties, particularly rising energy prices and geopolitical tensions that could put pressure on consumer prices in the coming months.

Malhotra noted that retail inflation remains within the RBI's comfort range for now. However, escalating fuel and energy costs driven by international developments could impact household budgets and overall price stability.

GDP growth forecast cut to 6.6%

The central bank also lowered its economic growth estimate for FY27 to 6.6 per cent from 6.9 per cent projected earlier.

According to the RBI, ongoing tensions in West Asia and disruptions in global supply chains have increased risks to economic activity, prompting a more cautious growth outlook.

Despite these concerns, the RBI said India's economy continues to demonstrate resilience, supported by steady domestic demand and healthy business activity.

MPC retains neutral policy stance

The Monetary Policy Committee decided to maintain its "neutral" policy stance, signalling flexibility in responding to future economic developments.

The RBI said policy decisions going forward would remain data-driven, taking into account inflation trends, growth dynamics and global economic conditions.

Monsoon risks remain a concern

The central bank also flagged concerns over the possibility of below-normal monsoon conditions. Weak rainfall could affect agricultural output and rural demand, potentially creating fresh challenges for the economy.

However, the RBI expressed confidence that government initiatives aimed at crop diversification and agricultural resilience could help mitigate some of the risks associated with weather-related disruptions.

Manufacturing and services support growth

The RBI highlighted that economic activity remains broadly stable, with both manufacturing and services sectors continuing to perform well.

The central bank also pointed to steady employment conditions and tax reforms, including GST rationalisation measures, as factors supporting consumption, particularly in urban areas.

What Repo Rate means for borrowers

The repo rate is the interest rate at which the RBI lends money to commercial banks. When the repo rate is reduced, banks generally gain access to cheaper funds and may pass on the benefit to customers through lower lending rates.

Conversely, a higher repo rate increases borrowing costs for banks, often resulting in more expensive loans for consumers and businesses.

With the repo rate unchanged at 5.25 per cent, existing borrowers are unlikely to see any immediate change in their home loan, vehicle loan or personal loan EMIs.

RBI MPC meets every two months

The Monetary Policy Committee consists of six members, including three representatives from the RBI and three members appointed by the Central Government.

The committee meets every two months to review economic conditions and decide on key policy rates. The current financial year will see six MPC meetings, with the first held in April 2026.