The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Friday unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, 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 held from June 3 to June 5 for FY2027, RBI Governor Sanjay Malhotra said the MPC had conducted a detailed assessment of the emerging 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.
“As a result, the standing deposit facility (SDF) rate remains at 5 per cent and the marginal standing facility (MSF) rate and bank rate at 5.5 per cent,” Malhotra said.
Repo rate is the interest rate at which RBI lends money to commercial banks for short-term financing needs. Decisions on the benchmark rate are closely watched because higher rates generally 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 is facing unprecedented challenges, including disruptions in key trade routes and supply chains, increased market volatility and cautious trading sentiment.
He said, “The global economy has been shaped by increased uncertainty, disruptions in key trade routes and supply chains, increased market volatility and cautious business sentiment. I would first like to emphasize that the Indian economy has entered this episode of global turmoil with better fundamentals than previous similar episodes.”
The Governor said India is relatively well positioned to absorb external shocks, but stressed the need to use the current period of unrest to further strengthen the country’s economic resilience.
“It is important to not only face and resolve these challenges, but at the same time, take this as an opportunity to increase our resilience,” he said.
Malhotra identified the ongoing geopolitical standoff in West Asia, rising energy prices and disruption in global supply chains as key risks to the world economy. He said central banks in major economies have become increasingly cautious as they balance the dual objectives of supporting growth and controlling inflation, with some advanced economy central banks potentially leaning toward tighter monetary policy.
The governor said that while global equity markets remain upbeat due to optimism around artificial intelligence-led growth, global bond markets face pressure amid inflation concerns and concerns over debt sustainability.
The latest decision comes after the MPC’s April policy meeting, when it voted unanimously to keep the repo rate unchanged at 5.25 per cent, maintaining the neutral policy stance.
