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Informist, Wednesday, Aug. 5, 2026

 

MUMBAI – Following is a compilation of first views of economists and market experts on the Reserve Bank of India's third bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:

 

BANKERS

 

AJAY KUMAR SRIVASTAVA, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, INDIAN OVERSEAS BANK

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The Reserve Bank's own assessment shows the banking sector continues to hold strong capital buffers, healthy liquidity and improving asset quality, which reinforces confidence in the stability of the financial system.

 

For our customers and businesses, this stability translates into predictable borrowing costs and continued credit flow, particularly to MSMEs (micro, small, and medium enterprises) and other productive sectors. The proposed harmonisation of interest rates on advances across all regulated entities, along with the draft guidelines for resuming licensing of urban co-operative banks, will further strengthen transparency and customer protection.  

(Ruchira Kagita)

 

BASKAR BABU RAMACHANDRAN, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER OF SURYODAY SMALL FINANCE BANK LTD.

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The RBI's decision to keep the repo rate unchanged at 5.25% reflects a balanced and prudent approach in the current environment, where domestic growth remains resilient. At the same time, global uncertainties continue to warrant caution. For small finance banks, policy stability is particularly important, as it creates a conducive environment to deepen credit penetration across the retail, microfinance, and micro, small, and medium enterprises segments while maintaining a disciplined approach to risk and profitability. It also helps manage funding costs more effectively in an increasingly competitive deposit landscape. The policy stance provides greater clarity on the interest rate outlook, which is positive for the banking industry as it supports effective planning of lending, deposit mobilisation, and overall balance sheet management. We believe a stable macroeconomic and rate environment will support responsible growth, strengthen financial inclusion efforts and enable us to continue serving underserved customers and emerging entrepreneurs with greater confidence. 

(Meera Nair)

 

PRALAY MONDAL, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, CSB BANK

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The RBI's policy decision is largely on expected lines and reinforces macroeconomic stability. Despite supply-side challenges, inflation remains well contained, while the central bank's liquidity measures continue to support credit flow and economic growth. The proposed framework for interest rates on advances is a welcome step towards greater transparency and uniformity in loan pricing, ultimately benefiting consumers. 

(Nandini Sinha)

 

RADHIKA RAO, SENIOR ECONOMIST AND EXECUTIVE DIRECTOR, DBS BANK

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The RBI signalled patience, but not complacency. By keeping the repo rate unchanged and retaining a neutral stance, the MPC has preserved flexibility while assessing whether recent inflation pressures remain temporary or evolve into a broader inflation cycle. The overall guidance was, however, less hawkish than anticipated. The Committee highlighted that signs of pass-through from higher food and fuel prices remain limited, while underlying inflation pressures continue to be relatively contained. This softer tone was reinforced by a modest downward revision to the inflation trajectory and a slight upward revision to the growth outlook. 

 

We see limited scope for a rate hike at the October meeting, consistent with our baseline expectation that policy rates remain unchanged through the rest of FY27. The MPC appears comfortable remaining on hold for now, given the absence of broad-based inflation pressures and lingering uncertainty around the inflation outlook. However, they retained sufficient flexibility to act if supply-side shocks begin to feed into more persistent core inflation.

 

The comparison between the inflation trajectory and the policy rate has brought the real rate debate back into focus. RBI projections imply inflation of around 5.3-5.5% over the year ahead, compared with a repo rate of 5.25%, implying a near-zero real policy rate buffer. This stands in contrast to earlier policy regimes where policymakers often referred to a positive real rate cushion of roughly 1.0-1.5 ppt. While the MPC did not explicitly emphasise this issue, a narrowing real policy rate cushion could become increasingly relevant if growth remains resilient and inflation risks persist.

 

Inflation risks remain skewed to the upside, particularly from oil prices, weather-related disruptions and potential broadening of input-cost pressures. At the same time, growth appears to be holding up better than expected, with the possibility that GDP growth exceeds 7% in 1QFY27. As a result, the MPC may gradually lay the groundwork for policy normalisation later in FY27, should inflation become more persistent and broad-based.

 

With rates unchanged and no immediate signal of tightening, market attention is likely to shift back to macro developments between now and the next policy review. The expected recovery in portfolio inflows, together with continued flows through RBI swap windows, should provide a constructive backdrop for domestic financial markets. Meanwhile, movements in crude oil prices, bond yields, and the rupee and inflation expectations will remain key determinants of market pricing for the policy path ahead.

(Meera Nair)

 

LAKSHMANAN V., GROUP PRESIDENT AND HEAD OF TREASURY AT FEDERAL BANK LTD.

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RBI monetary policy committee unanimously decided to keep the rates unchanged at 5.25% and stance neutral.

 

Consumer Price Index for FY27 is revised lower to 5% from 5.1%, primarily owing to a much softer inflation recorded in Q1FY27. Likewise the growth performance in Q1FY27 has led to an upward revision in annual growth projections by 10 bps from 6.6% to 6.7%. The policy with a neutral stance is clearly guiding a wait-and-watch mode on future rate direction, based on how the growth-inflation dynamics play out in the coming period. The risks to watch out among others will clearly be south-west monsoons, El Nino, geopolitical risks and global trade policy. 

(Meera Nair)

 

V.R.C. REDDY, HEAD OF TREASURY, KARUR VYSYA BANK

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The RBI has delivered a policy of continuity with no surprises. While the repo rate and neutral stance were widely expected, the upward revision in growth and downward revision in inflation reflect confidence in India's resilient macro fundamentals, giving the policy a mildly dovish undertone. The governor's tone suggests that the RBI remains comfortably on hold, with any discussion on rate hikes likely deferred to next calendar year, unless global developments materially alter the outlook.

 

With domestic fundamentals remaining robust, the market's focus now shifts to global central bank actions, crude oil prices and developments in West Asia. Healthy Balance of Payments, sustained Foreign Portfolio Investor inflows and strong Foreign Currency Non-Resident (Bank) mobilisation should continue to support rupee stability and durable liquidity.

 

For the bond market, the policy offers few fresh directional cues. G-Sec (government security) yields are likely to be driven by liquidity conditions, crude prices and global bond yield movements. Strong FCNR led liquidity should keep the short end well supported, while the 10-year benchmark is expected to trade in the 6.70%–6.90% range this quarter, barring any major global shocks. 

(Janwee Prajapati) 

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ECONOMISTS

 

DHARMAKIRTI JOSHI, CHIEF ECONOMIST AT CRISIL LTD.

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The Monetary Policy Committee of the Reserve Bank of India (RBI) stayed with consensus on rates and stance.

 

In terms of growth-inflation mix, there is a marginal improvement compared with the June forecast, with growth now projected to be 10 basis points higher and inflation 10 basis points lower.

 

While retail inflation, as measured by the Consumer Price Index, moved above the 4% marker line in June, the rise was largely supply-driven, led by higher crude oil and commodity prices, and on a weak base. Core inflation remains relatively contained, suggesting that demand-side price pressures are not yet broad-based.

 

At the same time, India's economic growth has remained reasonably resilient, supported by healthy domestic demand and strong corporate- and banking-sector balance sheets. However, we expect growth to moderate to 6.6% from 7.7% in the previous fiscal as higher oil prices, weather-related uncertainties and a softer global environment begin to weigh on economic activity.

 

The key risks to monitor are the trajectory of crude oil prices and the progress of the southwest monsoon given the incipience of El Nino conditions. Global central banks also remain vigilant on inflation, with some raising interest rates and others maintaining the status quo.

 

At this juncture, monetary authorities would prefer to have the flexibility on policy rates based on data.

(Nandini Sinha)

 

ANITHA RANGAN, CHIEF ECONOMIST, RBL BANK LTD.

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The Reserve Bank of India keeps policy rate unchanged as expected at 5.25% in a unanimous decision and also keeping stance at "neutral". On the view that despite expected increase in headline inflation it is not expected to get broad based into core as it is driven by food and fuel, RBI kept policy rates unchanged. Governor (Sanjay Malhotra) quoted that they need greater clarity on inflation effects to recalibrate rates. Alongside inflation expectation was revised downward by 10 bp (basis points) to 5% for 2026-27 (Apr-Mar) while growth was revised upwards by 10 bp to 6.75(%) for FY27. Acknowledging that external shocks do pose upside risks to CAD (current account deficit), the policy statement noted that trade deals, services resilience, remittances mitigate the risks. Capital flow measures will drive a BoP (balance of payment) surplus. No specific measures on liquidity were announced with a commitment to manage liquidity proactively. However, (Malhotra) noted that further rate transmission has moderated with both deposit and lending rates hardening since June.

 

Overall, the policy statement continues to suggest that RBI is willing to wait and watch and will adopt a more reactive approach with respect to policy rates and increasingly rely on non-monetary tools (for liquidity and flows) to steer the economy. With the stance at neutral, we would think that unless geopolitical pressures go for the adverse over the next two months, RBI will remain more proactive on liquidity measures in October rather on rates. The comfort on core inflation (suggests) that RBI is awaiting evidence (to see) sustained impact of second-order effects on inflation to act on rates. 

(Nandini Sinha)

 

AASTHA GUDWANI, INDIA CHIEF ECONOMIST, BARCLAYS

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The Reserve Bank of India's Monetary Policy Committee decided to keep policy rates on hold and retained its "neutral" stance as well. This was in line with our and consensus expectation. The MPC statement underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target of 4% in the medium term. We take comfort from Governor Sanjay Malhotra's continued emphasis on the current and imminent increase in inflation still not being entrenched, offering room to the MPC to persist with a pause. 

 

Particularly for growth, Malhotra noted that performance of high-frequency indicators has been better than expected, which led to upward revision of its Apr-Jun GDP growth forecast to 7.0% year-on-year (data due in first week of September). We still expect some upside surprise to this. We continue to see no change in policy repo rate for the remainder of 2026. 

(Divya Moolayattil)

 

RAJANI SINHA, CHIEF ECONOMIST, CAREEDGE RATINGS

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RBI's MPC decision to leave the policy rate unchanged was in line with our expectations. However, the tone of the policy was more dovish than we expected. The Central Bank highlighted that while the core inflation has risen, core inflation excluding precious metals remains benign. The central bank sounded quite confident on the growth front with a sharp upward revision in Q1 GDP growth estimate. Overall GDP growth has been marginally revised upwards, bringing it in line with our projection of 6.7% for FY27. While the central bank highlighted the monsoon concerns, overall CPI inflation projection has been marginally reduced lower to 5% for FY27, again this is in line with our projection.

 

We expect status quo in the policy rate to be maintained in the current fiscal year, unless the inflationary risks aggravate. With food inflation likely to peak in Q3 FY27, the real rate of interest could turn negative temporarily. However, the central bank may look through it as long as there are no indications of the pricing pressure getting broad-based. In the fluid global and domestic environment, the central bank may prefer to remain growth supportive. 

(Divya Moolayattil)

 

DEBOPAM CHAUDHURI, CHIEF ECONOMIST, PIRAMAL GROUP

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The RBI's decision to maintain both the policy rate and its neutral stance was widely expected, but the 40 basis points downward revision in the Q2 (September quarter) inflation forecast was the key surprise. By reiterating that inflation remains largely supply-driven rather than broad-based, the MPC has created room for another pause in October before any potential rate hike in February. This should cap any sharp rise in corporate borrowing costs over the next few months and provide greater funding certainty for banks, non-banking financial companies and corporates.

 

Unlike the recent market reaction to the US Federal Reserve's pause, Indian bond and equity markets have remained stable after RBI's pause, reflecting stronger investor confidence in the Indian central bank's ability to balance inflation management with growth. This is a positive for FPI and FDI inflows. With crude oil below $80 per barrel and expected FCNR(B) inflows supporting rupee liquidity, the macro environment has become more favourable for India despite global uncertainties. 

(Diksha Tripathy)

 

VIKRAM CHHABRA, SENIOR ECONOMIST, 360 ONE ASSET

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The macroeconomic outlook remains uncertain with the West Asia conflict fuelling volatility in crude oil prices, while strengthening El Nino conditions raise the risk of a weaker monsoon. These factors pose challenges to both growth and inflation. Against this backdrop, the RBI's decision to adopt a wait-and-watch approach at its August policy meeting was appropriate.

 

If the geopolitical situation stabilises and the monsoon remains close to normal, we expect the RBI to keep rates unchanged for an extended period. However, if crude oil prices remain elevated and a weak monsoon disrupts agricultural output, driving up food inflation, the RBI may be compelled to raise interest rates by the end of FY27. 

(Diksha Tripathy)

 

ADITI NAYAR, CHIEF ECONOMIST, ICRA LTD.

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A status quo on the policy rate and stance by the Monetary Policy Committee in the August meeting was a foregone conclusion, given the limited evidence of generalisation of inflationary pressures so far. Amidst considerable volatility engendered by geopolitics and the monsoon, the committee's growth and inflation forecast were tweaked marginally, and we believe that these are appropriate for an average crude oil price of $80-$85/barrel and a moderate rainfall deficit. Importantly, the tone of the policy statement was relatively neutral, and does not suggest that rate tightening is imminent. 

(Meera Nair) 

 

MADHAVI ARORA, CHIEF ECONOMIST, EMKAY GLOBAL

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The policy tone is cautious albeit constructive, balancing uncertainties from the West Asia conflict, tighter global financial conditions, and El Nino risks against resilient domestic growth and robust FCNR+ (foreign currency non-resident) inflows. Despite Apr-Jun inflation undershooting the Reserve Bank of India's forecast, the Monetary Policy Committee has retained its emphasis on El Nino risks, while reiterating that any near-term price pressures would largely be supply driven, unless they broaden into second-round inflation effects for monetary policy to act. We expect core liquidity to peak in Jul-Sept before normalising in the second half of this financial year, as the FCNR+ window closes and currency leakage picks up. Accordingly, the RBI is more likely to rely on temporary liquidity absorption measures rather than tightening its policy stance. 

(Meera Nair) 

 

UPASNA BHARDWAJ, CHIEF ECONOMIST, KOTAK MAHINDRA BANK

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The Reserve Bank of India's decision of status quo has been in line with expectations. The tone has been well balanced, highlighting the risks and, hence, the policy decisions ahead being data dependent. We continue to see scope for 50 basis points of rate hike in 2HFY27 (Oct-Mar), especially as 1QFY28 (June quarter of next financial year FY2028) inflation also continues to look above 5%.

(Nandini Sinha)

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FUND MANAGERS

 

PRASHANT PIMPLE, CHIEF INVESTMENT OFFICER, FIXED INCOME, AT BARODA BNP PARIBAS MUTUAL FUND

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The RBI's Monetary Policy Committee voted unanimously to hold the benchmark repurchase rate at 5.25% for a fourth consecutive review, retaining its neutral stance. The decision was in line with broad market expectations. The MPC cited elevated energy costs stemming from the Middle East (West Asia) conflict as a key risk, with headline inflation expected to rise in the near term and peak in the third quarter driven primarily by fuel and food prices, while core inflation continues to remain benign. On the growth and inflation outlook, the RBI raised its FY27 GDP forecast to 6.7% from a previous estimate of 6.60% and lowered its full-year CPI inflation projection to 5.0% from 5.10%, with Q2 FY27 CPI seen at 4.7%. With the neutral stance retained in the current policy, the bar for rate move in 2026 calendar year appears higher. 

(Meera Nair)

 

KAUSTUBH GUPTA, CHIEF INVESTMENT OFFICER–FIXED INCOME, ADITYA BIRLA SUN LIFE AMC LTD.

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The Monetary Policy Committee's policy decision of keeping the policy rate unchanged with a neutral stance is on the expected lines. Overall, the narrative reads well-balanced and hints towards a data-dependent approach rather than guiding towards any certain direction at this juncture. Real GDP growth for FY27 has been raised to 6.7% (vs 6.6%) while lowering the CPI to 4.7% (vs 5.1%) driven by the lower estimates for Apr-Sept 2026-27 (Apr-Mar). This reflects the governor's statement that inflation pressure so far is limited to fuel and not broad-based while second half of FY27 is seeing pressures from higher food inflation. 

(Divya Moolayattil)

 

RAHUL GOSWAMI, CHIEF INVESTMENT OFFICER AND MANAGING DIRECTOR, INDIA FIXED INCOME, FRANKLIN TEMPLETON

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The RBI delivered a widely-anticipated hold on policy rates, balancing resilient growth amid still-contained inflation outlook. By maintaining a neutral stance, the central bank has preserved flexibility rather than signalling a tightening bias. We remain constructive on high-quality fixed income instruments and expect yield movements to be driven more by global geopolitical developments that may impact inflation outcome, than by expectations of future policy actions. 

(Meera Nair)

 

SNEHA PANDEY, FUND MANAGER-FIXED INCOME, QUANTUM AMC

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The RBI played it safe but not silent...rates on hold, but the growth-inflation dial just quietly nudged in the market's favour. Growth up 10 basis points, inflation down 10 bps: that's about as close as a central bank gets to saying 'we're comfortable' without actually saying it.

 

No surprises on the headline. A unanimous hold and a neutral stance was broadly the expected base case. What's more telling is the fine print: the RBI nudged FY27 (Apr-Mar) growth up to 6.7% and inflation down to 5%, a small but meaningful signal that the growth-inflation mix is evolving in the MPC's favour, not against it.

 

The governor's own framing does the heavy lifting here...flagging that inflation is likely to peak in Q3 (the December quarter) on food and fuel, while being careful to note this isn't broad-based. That's central-bank-speak for 'we see the number, we're not panicking about it.' Core inflation staying benign is really the load-bearing wall of this entire policy — as long as that holds, the RBI has earned itself the right to wait for 'greater clarity' rather than pre-committing to a path either way.

 

For bond markets, the real actionable line isn't the rate call at all. It's the liquidity commentary. A 'two-way' approach to keep weighted average call rate anchored around the policy corridor tells you the RBI is now actively managing both surplus and tightness, not just sitting on a growing cushion. That's the detail desks should be pricing, not the unchanged repo number everyone already knew was coming.

 

Read together, this was a more dovish policy than hawkish. And what stood out just as much as the tone itself was what was missing from it. Given how unresolved the West Asia conflict remains, and how directly it has already fed into oil prices and yields this year, a genuinely cautious central bank had every reason to sound more guarded on that risk than it did. It didn't, and that comfort is a genuine positive for equities.

 

For bonds, though, it cuts the other way: with the growth-inflation mix already this favourable, there's very little runway left for an extended rally from here, and yields are likely to stay range-bound, more sensitive to external shocks (West Asia, the Fed's own trajectory) than to anything domestic from this point on. That argues for caution on aggressive duration calls and a greater tilt toward accrual as the more dependable strategy in the near term. It's also a reasonable moment for investors to evaluate dynamic bond funds which are ideally a well-blended mix of government securities and AAA-rated state-owned banks' bonds that actively manage duration through this kind of range-bound market without layering on additional credit risk on top of it. 

(Diksha Tripathy)

 

SACHIN BAJAJ, CHIEF INVESTMENT OFFICER, AXIS MAX LIFE INSURANCE LTD.

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The Monetary Policy Committee meeting came against a backdrop of challenging global macroeconomic conditions, persistent geopolitical uncertainties, and concerns around inflation outlook. As widely expected, the MPC decided to keep the policy repo rate unchanged at 5.25% and retained the policy stance as 'neutral', reflecting a cautious approach amid emerging domestic and global risks. The RBI highlighted uncertainties due to weaker monsoon season, potential impact on commodity prices, particularly energy prices, that continue to pose upside risks to the inflation trajectory. Overall, today's policy was a non-event for markets as the outcome is largely on expected lines. Going forward, we expect the MPC to be on wait and watch mode and wait for clarity on inflation outlook and future policy actions that are contingent on the evolving growth-inflation dynamics. 

(Nandini Sinha)

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OTHERS

 

RISHI ANAND, MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER, AADHAR HOUSING FINANCE LTD.

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The RBI's decision to keep the policy repo rate unchanged at 5.25% while maintaining a neutral stance reflects its balanced approach towards supporting growth and ensuring macroeconomic stability amid an evolving global environment. India's strong economic fundamentals, along with the resilience of the banking and NBFC (non-banking finance company) sectors, continue to provide a stable foundation for credit growth despite external uncertainties.
 
For the housing finance sector, this policy continuity is expected to sustain housing demand during the festive season is reassuring for both lenders and homebuyers, especially first-time buyers, as it allows them to plan their home purchase with greater confidence. With the festive season around the corner, steady financing conditions are expected to support genuine housing demand and encourage more people to access formal housing finance. Going forward, a stable economy and continued focus on financial inclusion will play an important role in making homeownership more accessible across Bharat.  

(Radhika Tiwari)

 

UMESH MOHANAN, EXECUTIVE DIRECTOR AND CHIEF EXECUTIVE OFFICER OF INDEL MONEY

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The RBI Monetary Policy Committee's decision to maintain the repo rate at 5.25% reflects a balanced and forward-looking approach as the economy navigates evolving global and domestic challenges. While inflation is expected to edge up in the coming quarters, the pressures remain largely supply-driven, stemming from higher food and fuel prices amid geopolitical developments, rather than broad-based demand pressures. In this backdrop, maintaining the policy rate and retaining flexibility is a prudent step that allows the RBI to respond appropriately to evolving macroeconomic conditions.

 

The upward revision of India's FY27 GDP growth forecast to 6.7% also underscores the resilience of the domestic economy. Strong domestic demand, sustained manufacturing activity, robust services exports, and improving merchandise exports continue to support growth despite uncertainties surrounding global trade and geopolitical tensions. At the same time, the RBI governor's assessment of healthy capitalisation, improving asset quality, adequate liquidity, and stronger profitability across banks and non-banking financial companies reinforces confidence in the financial sector's ability to support economic growth.

 

Although the merchandise trade deficit has widened due to higher imports of crude oil, electronics and gold, India's external position remains resilient, supported by a current account surplus in the early part of the fiscal year, healthy remittance inflows, strong services exports and buoyant foreign direct investment. For the gold loan industry, policy continuity and a stable financial environment are positive developments. Gold loans continue to provide households, micro, small, and medium enterprises, traders and small businesses with timely access to formal credit, and we expect demand for secured lending to remain healthy as economic activity gathers momentum.

(Meera Nair)

 

ASHWANI DHANAWAT, EXECUTIVE DIRECTOR AND CHIEF INVESTMENT OFFICER AT SHRIRAM GENERAL INSURANCE

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RBI's decision to keep the repo rate unchanged at 5.25% was largely expected. For insurers, however, the policy narrative is of more significance than the policy rate itself. The RBI's assessment of inflation, liquidity, and the future rate path will have a greater bearing on reinvestment yields across insurers' fixed income portfolios than the headline decision. Adoption of a neutral stance signals that the central bank prioritises preserving flexibility amid persistent food, fuel-led inflation, and global uncertainties, while remaining confident about India's growth resilience. A stable interest rate environment supports disciplined asset-liability management and long-term capital deployment for all insurance players. Further, as inflation evolves and liquidity conditions normalise, monitoring the bond yields trajectory will be key to influencing investment income, enabling insurers' ability to deliver sustainable value to policyholders.  

(Radhika Tiwari)

 

AVNISH JAIN, CHIEF INVESTMENT OFFICER - FIXED INCOME, CANARA ROBECO ASSET MANAGEMENT CO. LTD.

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RBI Monetary Policy Committee kept the repo rate steady at 5.25% with stance being maintained at neutral. The RBI MPC policy continues to be driven by incoming data, with the US-Iran war creating uncertainty and risks on monsoons from El Nino. The policymakers believe that inflation has largely been driven by supplyside shocks and broad-based price pressures are limited. RBI MPC increased the GDP growth projection to 6.7% whilst reducing CPI projection to 5% for FY27. Liquidity is expected to remain benign as forex (foreign exchange) inflows from FCNR(B) (foreign currency non-resident (banks)) and ECB (European Central Bank) deposits remain robust.

 

 The policy was as per market expectations, and rates did not react much to the announcement. 10Y GSEC (10-year benchmark government bond) yield had opened lower at 6.77-6.78% on crude (oil) prices trading below US$80/bbl (on renewed chatter on talks between US-Iran to open the Strait of Hormuz) and trading near those levels. Going forward, markets will likely be driven by geopolitical developments. Markets will further be tracking inflation numbers coming out next week. In the short term, 10Y GSEC is expected to move in the 6.70-6.85% range. 

(Radhika Tiwari)

 

JATEEN TRIVEDI, VICE-PRESIDENT AND RESEARCH ANALYST, COMMODITY AND CURRENCY, AT LKP SECURITIES

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The RBI's decision to keep the repo rate unchanged at 5.25% has reinforced confidence in the Indian rupee by signalling policy stability and confidence in the domestic economy. Along with the RBI's improved 6.7% GDP growth forecast, lower inflation outlook, and the recent decline in crude oil prices, the rupee has strengthened to around 95.20–95.08 against the US dollar. Going forward, sustained FII (foreign institutional investor) inflows, softer crude prices, and a stable dollar could keep the rupee biased towards appreciation, although global geopolitical developments will continue to be closely monitored.  

(Radhika Tiwari)

 

RANEN BANERJEE, PARTNER AND LEADER, ECONOMIC ADVISER, PWC INDIA

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The pause by the MPC was as per expectations. The volatility in trade and energy flows makes it very difficult to make a move on the policy rates, as we have almost daily swings, especially on the Middle East (West Asia) front, and that has a great bearing on the Indian economy. The monsoon-related uncertainty on the agricultural front and consequently food inflation risks have weighed on the decision, but there is optimism that inflation abates in Q4 (March quarter). A positive note is that on the growth front, the RBI expects to hold and possibly improve. Since there is no overheating of the economy and inflation is still within its targeted band, the future MPC meeting decisions will be more influenced by the movement of US yields, developments in the Middle East, and capital flows. 

(Radhika Tiwari)

 

DNYANADA VAIDYA, RESEARCH ANALYST, AXIS DIRECT

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The RBI's decision to maintain the repo rate while keeping its neutral stance was largely anticipated as inflationary pressures eased slightly and growth remained resilient. While oil prices have corrected, monsoon-related challenges remain a key risk for the inflation and are keenly eyed. The regulator has revised its inflation estimates marginally lower to 5% from 5.1?rlier, with core inflation revised downwards to 4.3% vs 4.7?rlier. Concurrently, growth estimates have been revised marginally higher to 6.7% for FY27 (Apr 2026-Mar 2027) vs 6.6?rlier. 

(Diksha Tripathy)

 

SHUBHADA PATIL, SMALLCASE MANAGER, FOUNDER AND MD, QUANTACE RESEARCH

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"Markets should treat 5.25% as the base case, not a guarantee. The August MPC retained the repo rate at 5.25% with a neutral stance, projecting FY2026-27 CPI inflation at 5.0%, a Q3 peak of 5.9%, and core inflation at 4.3%. June CPI was 4.4%, but core inflation excluding precious metals remained 2.3–2.5%, supporting patience because pressures remain concentrated in food and fuel rather than broad demand.

 

The policy asymmetry is defensive. At the full-year inflation forecast, the real repo rate is 25 basis points; at the projected Q3 peak, it turns negative. That is acceptable only while inflation expectations stay anchored and rupee movements remain orderly. RBI's toolkit includes FX intervention, concessional swaps for public-sector external commercial borrowings, hedging-cost support for new FCNR (B) deposits, and foreign access to Indian securities, addressing currency stress before using the repo rate.

 

Our view is to price an extended 5.25% hold as the central case, but treat 5.50% as the defensive outcome if oil strength, sharper INR depreciation, or rising core and services inflation signals generalised imported cost pressures. A prolonged hold favours deposit-rich banks, capital goods and infrastructure, while a defensive hike would weigh on NBFCs, real estate, autos and EMI-sensitive consumption sectors."

(Janaki Venugopalan)   

 

RAHUL BAJORIA, HEAD OF INDIA AND ASEAN ECONOMIC RESEARCH, BOFA SECURITIES

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Amid continued global volatility, the MPC today unanimously voted to keep the repo rate unchanged at 5.25% while also maintaining a neutral stance. However, the tone of the governor was still dovish, with global trade uncertainty, weather risks, and benign underlying inflation still being flagged as risk factors the RBI is monitoring. The RBI did lower its inflation projections marginally while raising the GDP growth forecasts slightly by 10 basis points each, but we do not see any clear commitment to a shift in policy behaviour, which we were expecting. Still, given that the incoming high frequency data is coming in quite strong, we see GDP growth momentum potentially being stronger than both RBI projections and our baseline GDP assumptions. Given the early signs of inflation rising and potential for growth to surprise on the upside, we believe RBI still may need to pivot to a more hawkish bias as growth visibility improves, and inflation risks start to manifest themselves.

 

While the governor's tone was dovish, and the revised projections for growth (+10bps) and inflation (-10bps) also point to an improving growth-inflation dynamic, we believe that given the MPC's inflation projections, the real rate will turn negative in Q3FY27 (December quarter) and will remain so till Q1FY28 (June quarter). Given this, and the improved outlook for growth with potential upside, we continue to retain our call of a 50bps rate hike starting December 2026 (25bps in Dec and 25bps in Feb-2027). Still, given the dovish guidance today, we believe a hike has been ruled out in October; however, the incoming domestic data and the evolving narrative around the Federal Reserve's outlook remains key to watch.

 

On the growth inflation dynamic, the RBI revised its growth projection higher (+10bps) to 6.7% yoy with risks evenly balanced, owing to the resilient HFIs so far. GDP growth for H1 is now seen at 6.7% (vs 6.5% previously) while H2 (Oct-Mar) is retained at 6.7% with some recovery expected in Q1FY28 (at 7.3%). Meanwhile, the MPC revised its inflation forecast lower by 10bps to 5.0% yoy with a greater downward revision in core inflation projections (by 40 bps) to 4.3%. Headline inflation is expected to peak in Q3 (December quarter) and moderate thereafter, suggesting the inflationary pressures are likely to be primarily driven by supply side pressures (food and fuel) and not be broad-based, with the demand pressures expected to remain contained."

(Diksha Tripathy)

 

 End

 

Compiled by Madhuri Pawar and Vinodini Yadav

Filed by Rajeev Pai

 

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