The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Friday unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, while maintaining its neutral policy stance amid rising global uncertainties, geopolitical tensions in West Asia and concerns over inflationary pressures.
Announcing the decisions of the second bi-monthly monetary policy meeting for FY27, held from June 3 to June 5, RBI Governor Sanjay Malhotra said the MPC had undertaken a detailed assessment of evolving macroeconomic and financial conditions before voting unanimously to leave the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25 per cent.
“Consequently, the Standing Deposit Facility (SDF) rate remains at 5 per cent and the Marginal Standing Facility (MSF) rate and the Bank Rate at 5.5 per cent,” Malhotra said.
The repo rate is the interest rate at which the RBI lends money to commercial banks for short-term funding requirements. Decisions on the benchmark rate are closely watched as higher rates typically make loans such as home, vehicle and business loans more expensive, while lower rates reduce borrowing costs and support consumption and economic activity.
Explaining the rationale behind the decision, Malhotra said the global economy continues to face unprecedented challenges, including disruptions to key trade routes and supply chains, heightened market volatility and cautious business sentiment.
“The global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment. Let me at the very outset emphasise that the Indian economy entered this episode of global turbulence with much better fundamentals than in previous similar episodes,” he said.
The Governor said India remains relatively well-positioned to withstand external shocks but stressed the need to use the current period of turbulence to further strengthen the country’s economic resilience.
“It is important to not only confront and address these challenges, but also, at the same time, take this as an opportunity to further enhance our resilience,” he added.
Malhotra also flagged the continuing geopolitical impasse in West Asia, rising energy prices and global supply chain disruptions as key risks weighing on the world economy. He noted that central banks across major economies have become increasingly cautious as they balance the twin objectives of supporting growth and containing inflation, with some advanced economy central banks potentially leaning towards tighter monetary policy.
While global equity markets remain buoyant, aided by optimism around artificial intelligence-led growth, global bond markets continue to face pressure amid renewed inflation concerns and worries over debt sustainability, the Governor said.
The latest decision follows the MPC’s April policy meeting, when it had also unanimously voted to keep the repo rate unchanged at 5.25 per cent while retaining the neutral policy stance.
