The Reserve Bank of India Monetary Policy Committee unanimously voted to keep the benchmark repo rate at 5.25% on June 5 [1, 3].
This decision reflects the central bank's attempt to balance domestic growth against volatile global conditions. By holding rates steady, the RBI seeks to manage inflation without stifling economic activity during a period of geopolitical instability.
Governor Sanjay Malhotra said the stance of monetary policy remains neutral [3]. The committee decided to maintain this position to assess the fallout from rising global energy costs and ongoing tensions in the Middle East [1, 2]. The bank is also monitoring rupee weakness and persistent inflation risks that continue to linger in the global economy [2].
Despite the steady interest rate, the bank adjusted its outlook for economic growth. The FY27 GDP growth forecast was revised to 6.6% [4], down from a previous projection of 6.9% [4]. Meanwhile, the projected inflation for FY27 is set at 5.1% [4].
Malhotra expressed confidence in the resilience of the Indian economy. "We are confident that India can withstand external shocks with 'minimum pain'," Malhotra said [4].
The unanimous vote to keep the repo rate unchanged at 5.25% signals a cautious approach by the MPC [3]. The bank is prioritizing stability as it navigates external pressures that could impact the domestic price index and currency value [1, 2].
“The committee unanimously decided to keep the repo rate unchanged at 5.25%.”
The RBI's decision to hold rates while lowering GDP growth forecasts suggests a defensive posture. By maintaining a neutral stance, the bank keeps its options open to either raise or lower rates depending on how Middle East tensions and energy prices evolve, prioritizing inflation control over aggressive growth targets.
