Reserve Bank of India Governor Sanjay Malhotra
Credit: PTI Photo
Reserve Bank of India Governor Sanjay Malhotra on Friday announced that the Monetary Policy Committee has decided to keep the policy repo rate unchanged at 5.25 per cent, and to maintain a neutral stance.
Monetary policy will be guided by new inflation data based on revised series, the RBI Governor said.
"The Monetary Policy Committee met on 4th, 5th (February) and today to deliberate and decide on policy repo rate. After a detailed assessment of evolving macro-economic condition and the economic outlook, the MPC voted unanimously to keep the policy repo rate unchanged at 5.25 per cent," Malhotra said in the announcement.
This comes after the central bank had cut the repo rate by 25 basis points in December 2025, bringing the benchmark rate down by 125 basis points since February last year.
"Amidst heightened geopolitical tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period," RBI Governor Sanjay Malhotra stated.
Key takeaways from Malhotra's announcement
Repo rate unchanged
Keeping the policy repo rate unchanged at 5.25 per cent, the RBI said the standing deposit facility (SDF) rate, or the rate at which banks can now deposit extra money with the RBI, remains at 5 per cent.
The rate at which banks can borrow money from the RBI in an emergency will remain at 5.50 per cent.
GDP outlook
The RBI revised its GDP growth projections for FY26 and the first half of FY27 upwards.
Malhotra said that the revised outlook for FY26 is 7.4 per cent from the earlier projection of 7.3 per cent.
RBI projected real GDP growth for Q1FY27 and Q2 to 6.9 per cent from 6.7 per cent earlier and 7 per cent from 6.8 per cent earlier, respectively.
"We are deferring the projections for the full year to the April policy as the new GDP series will be released later in the month," said the RBI Governor.
Inflation
The RBI said that it expects retail inflation to rise, but adds that it may remain in its tolerance band of 2-6%
According to Malhotra, the RBI has projected Consumer Price Index (CPI)-based inflation, or retail inflation, for FY26 at 2.1 per cent from 2 per cent earlier.
Inflation for Q4FY26 is projected at 3.2 per cent, up from 2.9 per cent, while for Q1FY27, it may rise to 4 per cent and for Q2FY27 to 4.2 per cent.
"Unfavourable base effects stemming from a large decline in prices observed during Q4FY25 would lead to an uptick in year-on-year inflation in Q4FY26. CPI inflation for FY26 is now projected at 2.1 per cent with Q4 at 3.2 per cent. CPI inflation for Q1FY27 and Q2FY27 is projected at 4 per cent and 4.2 per cent, respectively," the RBI Governor announced.
Additionally, Malhotra said central bank will present CPI inflation projection for the full year FY27 in the April 2026 policy statement.
Big announcements for banks, customers
Malhotra said that the RBI has introduced a new set of regulatory measures to strengthen customer protection, expand financial inclusion, and improve the ease of doing business for non-banking financial companies (NBFCs) and urban cooperative banks (UCBs).
RBI will issue three draft guidelines for customer protection. These include relating to mis-selling; regarding recovery of loans and engagement of recovery agents; and on limiting the liability of customers in unauthorised electronic banking transactions.
"It is also proposed to introduce a framework to compensate customers up to an amount of Rs 25,000 for loss incurred in small-value fraudulent transactions," Malhotra.
The RBI will also publish a discussion paper on possible measures to enhance the safety of digital payments.
Further, the RBI proposed increasing the limit for collateral-free loans to MSMEs from Rs10 lakh to Rs 20 lakh.
It also proposed to allow banks to lend to REITs with certain prudential safeguards to further promote financing to the real estate sector.
To promote ease of doing business for NBFCs, it said the organisations having no public funds and customer interface, with asset size not exceeding Rs 1000 crore, may be exempted from the requirement of registration.
Moreover, it also proposed to dispense with the requirement for certain NBFCs to obtain prior approval to open more than 1000 branches.