RBI Holds Repo Rate At 5.25% After Union Budget

The Reserve Bank of India (RBI) on Thursday kept the repo rate unchanged at 5.25% in its first monetary policy decision after the Union Budget 2026, signalling confidence in growth while remaining cautious on inflation amid global uncertainty.

Status Quo on Rates and Policy Stance

Announcing the decision after the three-day meeting of the Monetary Policy Committee, RBI Governor Sanjay Malhotra said the decision was unanimous. The central bank also retained its monetary policy stance at “neutral”, indicating that interest rates are likely to remain stable in the near term unless macroeconomic conditions change sharply.

Growth Outlook Remains Strong

The RBI assessed the Indian economy to be on a firm footing despite global volatility. Real GDP growth for the current financial year has been pegged at 7.4%. For the next financial year, growth is projected at 6.9% in the first quarter and 7% in the second quarter. The central bank noted that underlying data suggests growth momentum could be sustained over a longer period.

Inflation Projections Marginally Raised

While holding rates steady, the RBI slightly revised its inflation outlook upwards. Retail inflation for the current financial year has been raised to 2.1%, with the ongoing quarter estimated at 3.2%. For the next financial year, inflation is projected at 4% in the first quarter and 4.2% in the second quarter, reflecting lingering price pressures even as overall inflation remains within the tolerance band.

Important Facts for Exams

• Repo rate is the rate at which the RBI lends short-term funds to commercial banks.
• The Monetary Policy Committee meets every two months to decide policy rates.
• RBI’s inflation target is 4%, with a tolerance band of ±2%.
• A “neutral” stance allows flexibility to either raise or cut rates.

Consumer Protection and Regulatory Measures

Beyond rates, the RBI announced plans to strengthen consumer protection in the financial system. The central bank will propose a framework to compensate customers up to ₹25,000 for losses arising from small-value digital transaction frauds. Draft guidelines are also expected on curbing mis-selling by lenders, improving loan recovery practices, and regulating the conduct of recovery agents, signalling tighter oversight of financial institutions.