RBI Governor backs current policy rate, calls it appropriate given robust eco growth, low inflation

Mumbai: Reserve Bank Governor Sanjay Malhotra voted for the status quo in the key interest rate earlier this month, saying the current policy rate was appropriate, given the buoyant economic growth and benign inflation, according to the MPC meeting minutes released on Friday.

The Reserve Bank kept the short-term lending rate (repo) unchanged at 5.25 per cent after the Monetary Policy Committee (MPC) meeting held from February 4 to 6.

The governor and the other five members of the MPC had voted to keep the repo rate unchanged.

According to the minutes, Malhotra argued that India’s macroeconomic fundamentals, over the medium-term, including the external sector, remain healthy and robust.

"Given the present state of the economy and its outlook, buoyant growth and benign inflation, I feel the current policy rate is appropriate. Accordingly, I vote for continuation of the policy repo rate at 5.25 per cent and retain the neutral stance," he said.

Deputy Governor Poonam Gupta said that, underpinned by the continued buoyancy of high-frequency indicators and model-based projections, preliminary estimates of growth for 2026-27 by various agencies have been revised upwards.

The RBI has also slightly raised the real GDP growth projections for Q1 and Q2 of 2026-27, guided by the positive near-term outlook and the trade deals.

"Having already lowered the policy rate by a cumulative 125 bps in four of the last six meetings, with transmission of the last rate cut announced in December 2025 still unfolding, and as the data from the new series is awaited for both GDP and inflation, another rate cut does not seem warranted at this point in time," Gupta said.

Based on a comprehensive review of the domestic macroeconomic conditions and the outlook, the MPC was of the view that the current policy rate was appropriate, and had voted to continue with the existing policy rate.