RBI keeps repo rate unchanged at 5.25 %, maintains neutral stance; GDP growth projected at 6.7 % for FY27
PTC News Desk: The Reserve Bank of India (RBI), headed by Governor Sanjay Malhotra, on Wednesday kept the benchmark repo rate unchanged at 5.25%, in line with market expectations. The decision comes as the central bank waits to see whether rising global crude oil prices will lead to higher inflation in India.
The six-member Monetary Policy Committee (MPC) unanimously decided to keep the repo rate unchanged and also retained its "neutral" policy stance, indicating that future decisions will depend on economic data.
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"Crude oil prices, currencies, and financial markets remain volatile, fluctuating in line with the changing intensity and uncertainties of the West Asia conflict. In this backdrop, the Monetary Policy Committee met for its third bi-monthly meeting of this financial year, on 3rd, 4th, and 5th, that is today, to deliberate and decide on the policy reparation," said the RBI Governor.
"After a detailed assessment of the evolving macroeconomic and financial developments, as well as the outlook, the MPC decided unanimously to keep the policy repo rate unchanged at 5.5%," he added.
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Why did the RBI keep the repo rate unchanged?
The RBI decided to maintain the current rate as inflation, although rising due to higher food and fuel prices, is still within its target range.
Economists believe the central bank has room to wait and assess whether higher crude oil prices will have a lasting impact on overall inflation. The decision also comes at a time when several central banks around the world have raised interest rates to tackle inflation driven by geopolitical tensions and rising energy costs.
What does this mean for borrowers?
Since the repo rate remains unchanged at 5.25%, people with repo-linked home loans, car loans and other floating-rate loans are unlikely to see any immediate change in their monthly EMIs.
Banks are also expected to keep lending and deposit interest rates largely unchanged unless there is a major shift in liquidity or funding costs.
RBI raises GDP growth forecast
Despite global uncertainties, the RBI has become more optimistic about India's economy. It has raised its real GDP growth forecast for the current financial year to 6.7%, citing stronger-than-expected economic performance in the first quarter.
Governor Sanjay Malhotra said the Indian economy performed better than expected, supported by strong domestic demand, healthy growth in the services and manufacturing sectors, and a recovery in exports.
He added that private consumption remains strong, driven by consumer spending, while continued government investment in infrastructure is supporting economic growth.
However, Malhotra cautioned that the outlook remains uncertain due to factors such as the southwest monsoon, El Niño conditions, geopolitical tensions and changes in global trade policies.
- With inputs from agencies
