A Pause After 125 Basis Points of Cuts
The Reserve Bank of India's Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, met from February 4 to 6, 2026, and unanimously decided to keep the policy repo rate unchanged at 5.25%, maintaining a "neutral" stance for the second consecutive meeting.
This was the RBI's first monetary policy decision of 2026, coming after a cumulative 125 basis points of rate cuts since February 2025, including a 25 basis point cut in December 2025.
Consequently, the Standing Deposit Facility (SDF) rate was held at 5.00%, while the Marginal Standing Facility (MSF) rate and the Bank Rate remained unchanged at 5.50%. The MPC voted 5:1 to retain the neutral stance, with one member, Professor Ram Singh, dissenting in favour of an "Accommodative" stance.
Growth Revised Upward, Inflation Remains Benign
The RBI raised its GDP growth forecast for FY26 to 7.4%, up from an earlier estimate of 7.3%, citing robust domestic consumption and improving trade prospects following US-India trade deals and increased government spending after the Union Budget.
Retail inflation for FY26 was projected at around 2.1%, comfortably within the RBI's 2-6% tolerance band, even though headline CPI inflation had firmed up somewhat in November and December 2025. GDP growth for the first half of FY27 was projected at 6.9% in Q1 and 7.0% in Q2.
Governor Malhotra struck a cautiously confident tone, balancing benign inflation and resilient growth against rising global uncertainties and a cautious domestic bond market.
Separately, the MPC also proposed exempting Type-I NBFCs — those below ₹1,000 crore in asset size with no public deposits or direct customer interface — from mandatory registration, a deregulatory step aimed at reducing compliance burden for low-risk non-banking financial companies.
Remember for exams: the repo rate at 5.25%, the neutral stance, the 7.4% FY26 growth forecast, and the Type-I NBFC exemption threshold of ₹1,000 crore.
