The Reserve Bank of India kept the repo rate unchanged at 5.25% during its Monetary Policy Committee meeting on June 5, 2026 [1], [2].
This decision reflects the central bank's attempt to balance domestic economic growth against global volatility, specifically the ongoing conflict in West Asia. By maintaining a neutral policy stance, the RBI is signaling a cautious approach to future rate adjustments while monitoring how international shocks impact local prices.
Governor Sanjay Malhotra said the committee revised the GDP growth outlook for the 2025-26 fiscal year down to 6.6% [2]. This adjustment comes as the bank assesses the economic drag caused by regional instability and shifting trade dynamics.
Regarding price stability, Malhotra said, "CPI inflation remains below the target, despite global shock, as the pass through to domestic prices has been limited, while the baseline projections point towards headline inflation firming up towards the upper tolerance level" [2].
The central bank is monitoring the limited impact of global shocks on domestic costs, though it expects inflation to move closer to the upper limit of its target range. This suggests that while current inflation is manageable, the RBI remains vigilant about potential spikes.
Financial data also showed a significant increase in the central bank's holdings. The RBI balance sheet expanded by 20.6% to ₹91.97 lakh crore in the 2025-26 fiscal year [3].
The committee's decision to hold rates steady follows a period of speculation regarding whether the bank would implement a hike to curb potential inflation or a cut to stimulate the lowered growth projections. The neutral stance provides the bank flexibility to react to the evolving situation in West Asia without committing to a specific trajectory.
“The Reserve Bank of India kept the repo rate unchanged at 5.25%.”
The RBI's decision to maintain the repo rate while lowering GDP projections suggests a defensive posture. By keeping rates steady and adopting a neutral stance, the bank is avoiding aggressive stimulus that could fuel inflation, while simultaneously acknowledging that geopolitical tensions in West Asia are dampening India's growth potential. The significant expansion of the balance sheet further indicates the bank's active role in managing liquidity during this period of global instability.
