RBI monetary policy: The Reserve Bank of India (RBI) on Wednesday, October 1, maintained a status quo on repo rate and policy stance, highlighting India’s favourable growth-inflation dynamics.
Meeting Street expectations, RBI Governor Sanjay Malhotra-led Monetary Policy Committee (MPC) kept the repo rate unchanged at 5.5 per cent, and maintained the policy stance as ‘neutral’.
“Growth-inflation dynamics have shifted since the August monetary policy. The rationalisation of GST is expected to have a dampening effect on inflation,” said Governor Malhotra.
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RBI MPC Meeting: Key highlights
1. Status quo on rate, policy stance
The central bank decided to keep the repo rate and monetary policy stance unchanged as the risk of inflation remains lower due to a healthy monsoon and GST cuts, while the growth outlook remains bright.
“After a detailed assessment of the evolving macroeconomic conditions and the outlook, the MPC (Monetary Policy Committee) voted unanimously to keep the policy repo rate unchanged at 5.50 per cent. Consequently, the standing deposit facility (SDF) rate remains at 5.25 per cent while the marginal standing facility (MSF) rate and the bank rate remain at 5.75 per cent. The MPC also decided to continue with the neutral stance,” said the RBI Governor.
After cutting rates by 50 basis points in June, the RBI maintained a status quo on rates in its August and September policy meetings.
2. Growth forecast revised upwards
The central bank highlighted that, despite an above-normal monsoon, good progress in kharif sowing and adequate reservoir levels have brightened the prospects for rural demand. The rationalisation of GST, along with buoyancy in the services sector and steady employment conditions, is supportive of overall demand.
However, the US tariffs remain a risk and could impact external demand.
Nevertheless, the RBI believes the implementation of structural reforms, including streamlining of GST, may offset some of the adverse effects of the external headwinds.
The RBI has raised India’s FY26 GDP growth estimates to 6.8 per cent from the previously projected 6.5 per cent.
The Q2FY26 growth forecast was raised to 7 per cent from 6.7 per cent, while the Q3FY26 GDP estimates were trimmed to 6.4 per cent from 6.6 per cent earlier.
The RBI expects Q4 FY26 GDP growth to be 6.2 per cent, down from the earlier projected 6.3 per cent. Q1FY27 GDP estimates were also trimmed to 6.4 per cent from 6.6 per cent.
3. Inflation sees a downward revision
The RBI revised inflation forecast downward to 2.6 per cent for FY26 from the earlier projected 3.1 per cent.
Q2 inflation projection was cut to 1.8 per cent from 2.1 per cent earlier, Q3 estimates were lowered to 1.8 per cent from 3.1 per cent, and Q4 estimates were cut to 4 per cent from 4.4 per cent. CPI inflation estimated for Q1FY27 was also trimmed to 4.5 per cent from 4.9 per cent.
“The progress of the southwest monsoon has been satisfactory. Healthy kharif sowing, adequate reservoir levels and comfortable buffer stocks of food-grains should keep food prices benign,” said the RBI Governor.
“The overall inflation outlook has turned even more benign in the last few months, due to a sharp decline in food prices and the rationalisation of GST rates,” said the governor.
4. Internationalisation of the Indian rupee
Banks in Bhutan, Nepal, and Sri Lanka will now be allowed to lend in Indian rupees to non-resident Indians (NRIs).
5. Additional measures
RBI proposes measures to improve credit flow to the real economy. The RBI Governor proposed reforms in insurance premiums and lending limits. The RBI proposed the removal of the ceiling on lending against listed debt securities, an increase in limits for lending against shares from ₹20 lakh to ₹1 crore per person, and an enhancement of IPO financing limits from ₹10 lakh to ₹25 lakh per person.
(This is a developing story. Please check back for fresh updates.)
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