Reserve Bank of India Governor Sanjay Malhotra announced June 5, 2026, that the central bank will keep the repo rate unchanged at 5.25% [1].
The decision comes as India navigates a volatile macroeconomic landscape. The central bank is attempting to balance inflation pressures and growth stability while the U.S.-Iran war in West Asia disrupts regional economic stability [1, 2].
Malhotra said the decision to hold the rate was intended to maintain a neutral stance. To counter external shocks, the Monetary Policy Committee also unveiled a series of measures designed to increase foreign exchange inflows, and strengthen national reserves [2].
This policy shift occurs alongside significant growth in the central bank's own holdings. The RBI balance sheet expanded 20.6% year-on-year [3] to reach ₹91.97 lakh crore in 2025-26 [3].
"We have kept the repo rate unchanged at 5.25% to maintain a neutral stance," Malhotra said [1].
Malhotra said that the MPC announced a host of measures to boost forex inflow and reserves [2]. These steps are intended to provide a buffer against the economic fallout from the ongoing conflict in West Asia, which has created headwinds for global trade and energy prices [1, 2].
The move to hold rates reflects a cautious approach to inflation. By avoiding a rate cut, the RBI aims to prevent further price volatility while ensuring that liquidity remains sufficient to support domestic growth [1, 2].
“"We have kept the repo rate unchanged at 5.25% to maintain a neutral stance."”
The RBI's decision to maintain a neutral interest rate suggests a priority on stability over aggressive growth stimulation. By focusing on foreign exchange reserves, the central bank is building a defensive wall against currency volatility and import shocks caused by the U.S.-Iran conflict, signaling that external geopolitical risks are currently the primary threat to India's economic outlook.
