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Informist, Wednesday, Aug. 5, 2026

MUMBAI - Following is a compilation of stories on the Reserve Bank of India's monetary policy that was detailed Wednesday:

SPECIAL STORIES

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FOCUS: BONDS CHEER SOFT RATE GUIDANCE; REMARKS RAISE CREDIBILITY CONCERNS

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Bond traders were prepared for the Monetary Policy Committee's rate decision, but the Reserve Bank of India's dovish commentary that put a repo rate hike off the table, even in October, caught them by surprise. The trade-off from this "dovishness" is that some traders fear this guidance could harm the credibility of the central bank's inflation targeting, which could eventually be reflected in bond yields. 

The rate-setting panel kept the repo rate at 5.25% and retained its 'neutral' stance, as widely expected. More importantly, it appeared willing to look through above-target inflation in the coming months, taking comfort from the declining inflation trajectory after inflation peaks at 5.9% in the December quarter. Though RBI Governor Sanjay Malhotra highlighted that the committee remained committed to aligning headline inflation to the medium-term target of 4%, the frequent reference to low underlying inflation pressures as measured by core inflation excluding precious metals seemed to suggest the panel was not keen to hike rates, traders said. 

In its resolution, the MPC also said more clarity was needed on the composition of inflation and its path before taking any rate action, while stressing there were no signs that price pressures were getting broad-based beyond food and fuel. With uncertainty hovering around the monsoon, the war in West Asia, and global trade policy, bond dealers were of the view that the panel did not appear convinced it would need to combat inflation through rate hikes at its next meeting either.

The one-year overnight indexed swap rate ended 11 basis points lower at 5.76% Wednesday, its lowest in nearly a month, as traders reduced the pricing of an October rate hike while retaining expectations of a cumulative 50-basis-point increase over the next 12 months. Those expectations were seen as a hedge against interest rate changes and OIS rates may remain steady while traders accumulate bonds, dealers said. Some market participants felt the panel gave itself the leeway to avoid hiking the repo rate at all in the coming meetings. 

"The RBI's decision broadly aligns with market expectations and gives room for yields to fall. The commentary showed that the MPC did not want to hike rates as long as inflation was not broad-based," said Alok Singh, head of treasury at CSB Bank. "I had built in a rate hike in February 2027, but I have taken it out now after the RBI's commentary."

The 10-year gilt yield fell to 6.77% Wednesday from 6.82% Tuesday. The five-year benchmark gilt yield – typically more sensitive to the near-term rate trajectory – fell 9 basis points to 6.31%, charting its best day in two months. Short-term bonds were in favour as the RBI governor hinted the central bank would not deploy tools to absorb durable liquidity as part of its monetary management in order to keep the weighted average call rate anchored to the repo rate.

The market reaction Wednesday was driven less by the domestic policy outcome and more by Brent crude futures slumping below $80 per barrel on reports the US and Iran were taking steps towards a peace deal to reopen the Strait of Hormuz. With immediate concerns of domestic rate action out of the way, traders said the near-term trajectory of the 10-year yield would largely be determined by global cues within a 6.65-6.85% band. Malhotra also highlighted the panel would be data-dependent in its next decisions. One risk to the domestic rate pause in October is if the US Federal Open Market Committee hikes the policy rate in September and crude oil prices remain volatile, dealers said. 

"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," said Sneha Pandey, fund manager-fixed income at Quantum Asset Management Co. "That argues for caution on aggressive duration calls and a greater tilt toward accrual as the more dependable strategy in the near term."

Pandey favours short-duration gilts and top-rated corporate bonds maturing in less than three years, as do Franklin Templeton Asset Management (India) and Edelweiss Asset Management Co.  

CREDIBILITY QUESTION

The bond market's belief in the messaging was enhanced by headline CPI inflation in the June quarter averaging 30 basis points below the RBI's forecast. These circumstances and this belief could turn very quickly should inflation surprise on the upside. September quarter inflation is projected at 4.7%, rising to 5.9% in Oct-Dec, before easing to 5.5% and 5.3% in the next two quarters. All these readings are well above the RBI's 4% inflation target assigned by the government and a monthly reading could even exceed 6%, the upper end of the target band, if crude oil prices rise further.

Neither Malhotra nor the MPC dwelled on headline CPI inflation averaging 5.35% in the 12 months to June 2027, according to the RBI's own forecasts. Nor did policymakers seem worried that retail inflation over the next year would average – or even rise – above the policy repo rate of 5.25%. The negative real interest rate encourages consumption and investment, potentially fuelling inflation as it disincentivises savers. This, along with India's interest rate differential with the US shrinking, is likely to make gilts unappealing to foreign portfolio investors, dealers said. 

The prevalent view is that short-term bond yields should fall while less interest-rate-sensitive maturities remain steady, similar to how US Treasury yields reacted to monetary policy in the world's largest economy. While yields on bonds below three years fall as the RBI sweeps away expectations of rate hikes in October and even December, yields on bonds maturing in seven years and higher may harden on the view that the MPC would have to hike rates more sharply later on to bring inflation back down to 4%, dealers said. 

To be sure, the government bond yield curve was already expected to steepen with robust demand for bonds from banks to manage their incoming liabilities. The RBI's special scheme on 3-5 year foreign currency non-resident (banks) deposits has already attracted nearly $37 billion of inflows between Jun. 8 and Friday. The total inflows are expected to reach $80 billion-$110 billion by Sept. 30, a mammoth amount that may at least initially be parked in government securities before being used for lending during the upcoming festival season, dealers said. 

"If they (MPC) are serious on the 4% target, they have to move on rates," said Rajeev Radhakrishnan, chief investment officer - Fixed Income at SBI Funds Management. "For the near-term, they have given relief and today the flows coming from the FCNR(B) scheme will mask the actual reaction, but over time at least the longer-term bond should reflect concerns that the inflation target is not being upheld."

The governor's remark that systemic liquidity would neither be high enough nor persistent enough to push up inflation also rankled some market observers. Instead of focusing on expected price pressure, RBI Governor Malhotra said surplus liquidity would eventually drain through currency in circulation, addressing a slack in demand. The net liquidity absorbed by the RBI – a proxy for the banking system liquidity surplus – rose to INR 3.34 trillion Tuesday, the highest since April. The liquidity surplus may even double in the next two months as FCNR(B) inflows continue and pent-up government spending comes into the system, dealers said. 

At the same time, some participants were sanguine that the commentary was best suited for domestic and global conditions in August. A potential end to the war and easing crude oil prices may reduce the build-up of inflationary pressures in the domestic economy. In the interim, the commentary would keep bond yields in check and lead to easier financing conditions in the economy, keeping the growth engine humming despite several external threats of slowdown, dealers said. Moreover, the RBI had given enough signs it would be open to reversing course quickly if circumstances demanded, with Malhotra even saying at the post-policy press conference that the MPC would not hesitate to hike rates if required. 

"To me, looking through these supply-side shocks on inflation builds on the RBI's credibility that it is focusing on underlying inflation pressures rather than raising rates due to transitory factors," CSB Bank's Singh said. Further reassuring to traders in this camp was that CPI inflation averaged only 2.1% in FY26, well below the RBI's target, giving some room to look through a transitory spike in prices – even if it lasts a year. 

All in all, bond traders had cause to cheer another policy meeting without any signs of monetary policy tightening. They are only uneasy that they are being led down a garden path to be slaughtered when external pressures force the RBI's hand.

Reported By Aaryan Khanna

Edited by Saji George Titus

INFORMIST POLL: MPC SEEN HOLDING RATE OCT; MAJORITY SEE REPO RATE HIKE FY27

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The Reserve Bank of India's Monetary Policy Committee is likely to keep the repo rate on hold for the fifth time in a row at its next meeting in October, according to an Informist Poll. However, a majority of economists sees rate hikes coming this financial year as the second order impact of cost pressure becomes visible. 

Fifteen of the 16 economists and market participants polled by Informist said they expect the rate-setting panel to hold the repo rate at 5.25% on Oct. 7. HSBC Bank expects the panel to hike rates by 25 basis points in October. Further, of the 16 participants, nine expect the Monetary Policy Committee to hike rates at least once in 2026-27 (Apr-Mar), with most expecting the first rate increase to happen at the December meeting. Seven economists said they do not expect an interest rate hike at all in 2026.

The committee left the repo rate unchanged at 5.25% Wednesday due to recent supply-side shocks not yet spilling over meaningfully into the wider CPI inflation basket. The Monetary Policy Committee had reduced the repo rate by 125 basis points in 2025, the largest cumulative easing in a calendar year since 2019. The repo rate was last raised in February 2023.

Most economists expect a repo rate hike, either in December or later in FY27, as inflation rises. The central bank Wednesday trimmed its CPI inflation projection for FY27 by 10 bps to 5.0%. However, the RBI sees inflation near the upper bound of the its 2-6% tolerance band in the December quarter. It sees inflation at 5.9% in Oct-Dec, before easing to 5.5% in Jan-Mar, still above the 4% medium-term target. 

"We expect the second-order effects of higher input costs to become visible from Q3 FY27 onwards, a view reinforced by management commentary across companies pointing to an impending pass-through of higher input prices to end consumers," HDFC Bank said in a note. "This, combined with the risk of an El Nino impact, tilts the balance of inflation risk to the upside."

Expectations of rising inflation, elevated global commodity prices, and resilient domestic demand suggest underlying inflation could build faster than the RBI currently anticipates, according to ANZ Banking Research. 

The RBI increased the GDP growth forecast for FY27 by 10 bps to 6.7%, with quarterly growth seen between 6.4%-7.0% throughout the year, reflecting resilience in economic activity in the face of global uncertainty. As per the RBI's fan chart, the FY27 growth can be 7% or even above, RBI Governor Sanjay Malhotra said Wednesday. The latest growth numbers have added to expectations that the rate-setting panel can raise interest rates to control inflation without hurting the world-beating growth.

"We too find that growth is strong, led by tailwinds from loose policy in 2026, strong domestic demand, strong export growth, and frontloading of manufacturing by domestic producers," HSBC Bank said in a note. "To put it differently, it doesn't seem that growth needs a helping hand from low interest rates." 

The following are the expectations of respondents on repo rate:

End

Reported by Pratiksha

Edited by Akul Nishant Akhoury

RBI POLICY STORIES

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LIST OF UPPER-LAYER NBFCS WILL BE OUT VERY SOON, SAYS MURMU

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The Reserve Bank of India will soon release the list of upper layer non-banking finance companies, Deputy Governor Shirish Chandra Murmu said Wednesday. "I think... the list will be out very soon," Murmu said at the post-monetary policy press conference.

On Jun. 24, the Reserve Bank of India finalised the criteria to identify non-banking finance companies in the upper layer, calling them transparent and simple criteria. This replaced the previous methodology that combined a list of top entities by size with a parametric scoring approach. Any non-banking finance company having an asset size of INR 1 trillion and above as per the latest audited balance sheet for the financial year will be part of the upper layer, the RBI said. The RBI will identify upper-layer non-banking finance companies annually based on asset size.

RBI Governor Sanjay Malhotra said the central bank issued directions on banks' interest rate on deposits to bring in more transparency. "There was a lack of clarity in certain aspects... we have standardised and clarified in a transparent manner. There is no major change. It's all about transparency," Malhotra said. He added that banks will now have to inform customers in advance about deposit rates through their websites. For bulk deposits, the RBI has also standardised the timing.

As per the amended norms announced Thursday, the RBI allowed banks to offer differential interest rates on bulk deposits based on differential run-off rates. The rates can now be set considering deposits or unsecured wholesale funding under the liquidity coverage rate framework. The central bank permitted this under the amended directions for banks' interest rate on deposits, which will be effective from Oct. 1.

The RBI has mandated that interest rates on all deposits, including bulk deposits, be offered strictly as per rates published in advance on bank websites. In a new timeline rule, the central bank added that bulk deposit rates must be disclosed by 1000 IST, with a grace time of 10 minutes, on each business day. 

Malhotra said there is currently no proposal to review norms related to succession planning and leadership tenures at banks. "We obviously have a need... but whether it is coming in the way or not has not been by examined by us and there is no proposal in this regard," he said.  

Reported by Vaishali Tyagi

Edited by Rajeev Pai

NO PLAN FOR EARLY CLOSURE, EXTENSION OF FCNR(B) SCHEME - MALHOTRA

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There is no proposal under consideration to close the foreign currency non-resident (banks) deposit scheme prematurely or to extend it beyond Sept. 30, Reserve Bank of India Governor Sanjay Malhotra said Wednesday. "There is neither a proposal nor there is a need, given the robust flows, to extend the timeline (of FCNR(B) window) as of now," Malhotra told the post-policy press conference here.

The central bank had in June announced a host of measures to attract foreign capital. Among the measures was a facility to cover the full hedging costs for banks raising fresh three- to five-year FCNR(B) deposits until Sept. 30. The swap facility, which came into effect on Jun. 8, will remain open till Oct. 16 for deposits mobilised between Jun. 8 and Sept. 30.

As per latest available data, the RBI's measures to garner inflows through FCNR(B) deposits had attracted $36.73 billion from Jun. 8 till Friday. The governor is hopeful of more healthy FCNR(B) deposits going ahead. However, he added that the RBI has no target in mind for total inflows through the scheme.

Asked what the RBI plans do with the dollar inflows from its schemes, Malhotra said the same is decided by a high-level committee. "We buy or sell our currencies and whatever are our reserves, for that there is a high-level committee, there are members from the government also which participate regularly in those meetings, and we take a call as to how we are going to manage those reserves."

Apart from inflows from the RBI's measures, India should continue to see good capital inflows, Malhotra said. "FDI (foreign direct investment) is certainly more durable, more sticky, and more preferable," he said. "We got good, robust gross FDI numbers. Even net FDI is positive. One is the number of agreements that have been signed on the trade agreement part, even that indirectly helps investment."

Going forward, Malhotra expects India's external position to be better. He also expects the RBI's capital inflow measures to help the expectation channels for the rupee's exchange rate.

Further, Malhotra said the rupee may appreciate in case the war in West Asia de-escalates, and it is the RBI's endeavour to see that the trajectory for the rupee remain orderly and there is no disruptive movement and self-fulfilling expectations getting built into the exchange rate. 

"Our policy  has always been that the markets determine the prices, level, and the band. We only intervene when there is an excessive volatility or there are speculative pressures that are getting built in," he said. Since the last monetary policy decision on Jun. 5, the rupee has depreciated 0.2% against the dollar.  

US$1 = INR 95.11

Reported by Pratiksha

Edited by Rajeev Pai

RATES, STANCE TO BE DATA DEPENDENT, SAYS GOVERNOR MALHOTRA

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The Reserve Bank of India's Monetary Policy Committee will continue to rely on high-frequency data when deciding on its policy stance and key policy rates, Governor Sanjay Malhotra said. "There is a lot of uncertainty in what we have said, and so we will take a call policy by policy and not give guidance that we need to change stance because we are ourselves not sure as to what policy action this will entail," he said at the post-policy press conference.

On Wednesday, the Monetary Policy Committee unanimously left the policy repo rate unchanged at 5.25%, even as El Nio and the war in West Asia continue to cloud the outlook. The panel also retained the neutral stance to respond appropriately to macroeconomic developments.

Malhotra said the committee's primary mandate is price stability, for which it will monitor growth-inflation dynamics. "If there is very high inflation, which requires us to raise rates, or the other way around, growth is very less... So if inflation is going up beyond the target, not aligning with the target persistently, over a long period of time, which requires large rate cuts... If you are uncertain or if you expect that the policy rates are not to be changed too much, then you may not change stance. You can still be data dependent, and you can take a call to change rates," he said.

"Let us see what is the change in the coming months. We will be data dependent. We will remain focused on our primary mandate of maintaining price stability and meeting our target of 4% headline inflation over the medium term," Malhotra said.

Friday, the committee lowered its CPI inflation forecast for 2026-27 (Apr-Mar) to 5.0% from 5.1% earlier. The monetary policy statement said that while CPI inflation increased to 4.4% in June, inflation in Apr-June was 30 basis points lower than what was earlier projected.

Asked about monetary policy transmission, Malhotra said it is more or less complete. "Monetary policy transmission is about 80 bps. It has moderated. It was about 90 bps on the lending side. And so I would say that it is more or less complete," he said.  The RBI has cut the repo rate by a cumulative 125 bps since February 2025.

Reported by Sagar Sen

Edited by Saji George Titus

DRAFT NORMS ON MULE ACCOUNTS SUBMITTED TO SC, SAYS SWAMINATHAN

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The Reserve Bank of India has submitted a draft standard operating procedure for dealing with mule accounts, or accounts linked to cyber-enabled fraud, to the Supreme Court, Deputy Governor Swaminathan Janakiraman said at the post-policy press conference Wednesday. The central bank will fine-tune the norms during the four-week timeframe given to it by the court, he said.

The RBI deputy governor's remarks came a day after a Supreme Court bench led by Chief Justice of India Surya Kant directed the RBI to formulate a standard operating procedure. 

The standard operating procedure should include a grievance redressal module and a money restoration module, the court told the central bank. "A draft SOP has already been prepared and submitted to the Supreme Court. So now we will fine-tune that in terms of the four weeks of time that has been given to the RBI," Swaminathan said. He also said significant efforts are being made to prevent fraud and consumer awareness is also being stepped up by the regulator and regulated entities. 

The deputy governor also assured the regulated entities will make the "best possible" effort to restore the money of victims as much as feasible. 

DIGITAL CURRENCY

Talking about the progress on the Central Bank Digital Currency, RBI Deputy Governor Rohit Jain said the project is no longer a pilot project for the RBI. The adoption of the Central Bank Digital Currency has increased over time, and it is being used for actual transactions, Jain said. 

"... They (e-rupee) are not pilots. They are actually on the ground being used, and we are following up with banks for increasing the use cases," Jain said. "... CBDC is actually being used for actual transactions... it is only for namesake that it is a pilot," he said. 

On the unified lending interface, the deputy governor said the RBI is engaging with various state governments to increase its adoption. "... We expect a lot more usage and popularity of both CBDC and ULI," he said.   

In April, former RBI deputy governor T. Rabi Sankar had said that the central bank was in no rush to launch the Central Bank Digital Currency. The right time to launch the Central Bank Digital Currency depends on other countries being "ready" for it, as the biggest advantage of this currency is in cross-border transactions, he had said.  

Reported by Diksha Tripathy

Edited by Saji George Titus

PREMATURE TO TALK ABOUT CHARGE ON UPI TRANSACTIONS, SAYS MALHOTRA

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Reserve Bank of India Governor Sanjay Malhotra said Wednesday it was premature to talk about levying charges on unified payments interface transactions, while noting that the cost of providing such payment services ultimately has to be borne by someone. Malhotra was speaking at a press conference after the conclusion of the Monetary Policy Committee's third bi-monthly meeting for FY27.

"Right now, the companies, their costs have to be paid by someone, whether it is a public fee or not...But, please keep in mind also that ultimately, the consumer in some way or the other is paying the policy. So... It may not be the same consumer...It may be the general economy. And you don't need to see it directly," Malhotra said.

His comments come a day after Finance Minister Nirmala Sitharaman tabled the Taxation and Other Laws (Amendment) Bill, 2026 in the Lok Sabha, proposing a host of tax and regulatory changes aimed at boosting investment, manufacturing and ease of doing business.

Under the Bill, the government will have the power to notify electronic payment modes on which banks and payment system providers cannot levy charges, replacing the existing framework linked to the Income-tax Act. The amendment also gives the government flexibility to decide which digital payment modes could attract a merchant discount rate in the future.

Merchant discount rate, or MDR, is a fee paid by merchants to banks or payment service providers for processing digital transactions. 

Reported by Meera Nair

Edited by Akul Nishant Akhoury

LIQUIDITY SURPLUS NOT UNUSUALLY HIGH, SHORT-LIVED – MALHOTRA

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Reserve Bank of India Governor Sanjay Malhotra said the current liquidity surplus in the banking system is not "extraordinarily" high and is expected to persist only in the short-term. "The liquidity may be in surplus only for the very short term," Malhotra told reporters at the post-policy press conference. "It (liquidity) may peak in Q2 around September or so. And going forward, it should get absorbed because of normal needs of the economy to increase in currency circulation." 

Banking system liquidity has risen since Friday to the highest level since Apr. 20, driven mainly by Foreign Currency Non-Resident (Bank) deposit inflows. The net liquidity absorbed by the RBI – a proxy for liquidity surplus – was at INR 3.34 trillion Tuesday, sharply up from INR 2.44 trillion Monday. Outstanding FCNR(B) deposits rose by $28 billion between Jun. 5 and Thursday to $60.55 billion, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha. 

Going forward, Malhotra said, FCNR(B) deposit inflows will return to a "normal" pace unless there is an unexpected surge in deposits. "But as I mentioned to you, the liquidity that it will inject is there for a short while," the governor said.  

He reiterated that the RBI will continue to manage liquidity so that its operating target, the weighted average call rate, aligns with the 5.25% policy repo rate. "So, the kind of liquidity that we will give out will depend on what is the policy rate. And what the policy rate will be determined by the growth and inflation dynamics where demand also comes in," Malhotra said.    

The Reserve Bank of India's Monetary Policy Committee unanimously left the policy repo rate unchanged at 5.25% on Wednesday. The rate-setting panel's decision was on expected lines. 

Reported by J. Navya Sruthi

Edited by Saji George Titus

BANKS WINDOW-DRESSING DEPOSITS NOT CONCERN, WILL PROBE REPEAT CASES

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Reserve Bank of India Governor Sanjay Malhotra Wednesday dismissed concerns over banks resorting to window-dressing of deposits to inflate their balance sheets at quarter-end, saying the practice does not provide any material benefit, is not substantial, and is therefore not a cause for concern for the central bank. He, however, said the RBI would examine specific cases if repeated instances of such practices are detected. 

Responding to a question during the post-monetary policy press conference on whether banks temporarily mobilise deposits to embellish their financial statements, Malhotra said such "window-dressing" does not materially alter a bank's balance sheet and therefore there is little incentive for this practice. "There is no benefit from such window-dressing," the governor said, adding that economists understand very well that temporary deposits around reporting dates neither provide any meaningful advantage nor have any material impact on a bank's balance sheet. 

The governor said he does not believe the practice is widespread or substantial enough to warrant concern, adding that the RBI's supervisory teams regularly scrutinise banks' operations and financial statements. "I do not think this window-dressing is happening on a very large scale or materially affecting balance sheets," he said. "We are not concerned about it." 

Malhotra said that while the central bank does not see evidence of widespread window-dressing of deposits, it would investigate specific cases if such practices are found to be recurring. "If there is a repeated pattern, we will certainly look into those specific cases," Malhotra said. 

The RBI's Monetary Policy Committee Wednesday left the policy repo rate unchanged at 5.25%. The committee also decided to retain the neutral stance to respond appropriately to macroeconomic developments. 

Reported by Kabir Sharma

Edited by Rajeev Pai

HOPE TO LAUNCH POLYMER BANKNOTES AT START OF FY28, SAYS MALHOTRA

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The Reserve Bank of India hopes the polymer currency notes will be in circulation at the beginning of the financial year 2027-28 (Apr-Mar), Governor Sanjay Malhotra said at a press conference Wednesday after the conclusion of the Monetary Policy Committee's third bi-monthly meeting for FY27.

The polymer banknotes serve two purposes – they enhance the durability and lifespan, especially of lower denomination notes where the velocity is higher, and they expand the capacity as the needs of the economy grow, the governor said. "This is still a pilot. We will test, check as to how they perform in the Indian conditions, climate, and other infrastructure that we have put in place. And it's only thereafter that we will see if we need to further scale it up as it is or with changes," Malhotra said.

The government has approved the central bank's proposal to introduce polymer banknotes for field trial, Minister of State for Finance Pankaj Chaudhary had told the Lok Sabha in a written reply last month. Initially, one billion polymer banknotes of denominations INR 10 and INR 20 will be rolled out. The polymer notes are proposed to be issued along with paper substrate-based banknotes. "There is no proposal to replace paper currency with polymer substrate-based banknotes," Chaudhary had said.

The Monetary Policy Committee Wednesday left the policy repo rate unchanged at 5.25% in a unanimous decision. The committee also decided to continue with its neutral stance.

Reported by Nandini Sinha

Edited by Shubhayan Bhattacharya

FAN CHART SUGGESTS INDIA FY27 GROWTH MAY TOP 7%, SAYS MALHOTRA

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India's GDP growth for 2026-27 (Apr-Mar) could be 7% or even above, surpassing the Monetary Policy Committee's latest projection of 6.7%, as suggested in the "fan chart" projections, Reserve Bank of India Governor Sanjay Malhotra said Wednesday. "The 6.7% growth...outlook that we have given is an estimate and we have also mentioned that risk are evenly balanced on both sides," Malhotra said during the post monetary policy press conference.

The central bank has worked on a "fan chart" to give relative probability distribution. "If you look at the fan chart, it will suggest that there is a possibility that the growth may be 7% or more," Malhotra said while responding to a question if he saw an overall GDP growth of over 7% in FY27 considering the data has been better than the forecast. The RBI uses graphical tool called fan chart in its monetary policy reports to show inflation and GDP projections along with the degree of uncertainty and risk surrounding them.

The governor, post June meeting, had said the Monetary Policy Committee will remain data-dependent and closely monitor the developments, including supply side pressures getting embedded in the general price level and inflation expectations. Earlier, the Monetary Policy Committee had estimated FY27 GDP growth at 6.9% in its April meeting and had cut its growth projection by 30 basis points to 6.6% in the June meeting.

Further, Malhotra said Indian economy has demonstrated great resilience amid the ongoing global situation and weather conditions. "It is still evolving. But it has been very resilient," he said. Adding to this, RBI Deputy Governor Poonam Gupta said, "The overall economy has become very resilient...resilience extends to different sectors, particularly the agricultural sector and the rural economy."

The resilience has played out in multiple way as seen in the data for the last 15 years, Gupta said. The government measures have been helpful for the agriculture and the allied sectors. Both the sectors are complimentary to each other. "The share of area that is irrigated now is much larger and it is a secular increase," Gupta said.

This implies that "though the rainfall deficiency and vagaries matter, they matter less than they used to in the past," Gupta said. Even the agricultural sector inputs being used, crop variety and seed varities have improved. Malhotra said, "We have seen that the agricultural groups themselves have used their own activities to generate income. And evolution has improved." 

Reported by Shweta

Edited by Akul Nishant Akhoury

WILL TAKE APT POLICY ACTION IF CORE INFLATION WARRANTS – MALHOTRA

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The Reserve Bank of India's Monetary Policy Committee will take appropriate policy action if core inflation warrants it, especially with the expectation that core inflation excluding precious metals can align with the core inflation level towards the end of the financial year, RBI Governor Sanjay Malhotra said Wednesday. "Underlying core inflation -- core minus precious metals -- is going up. Whatever benign inflation we were in is not there going forward. We are watching out for that," Malhotra said in the post-policy press conference.

Core inflation excluding precious metals leaves behind manufactured goods, services, housing, clothing, and transportation, metrics that tend to go high due to domestic demand-driven price pressures and second-order effects of higher energy costs.

Earlier in the day, the governor said the underlying inflation, reflected by core inflation, excluding precious metals, which has been benign for some time, is set to align with core inflation towards the end of the financial year. As per the latest data, headline CPI was 4.38% in June, breaching the RBI's 4% target after 17 months, primarily due to high food and fuel prices -- which tend to be volatile. Core inflation remained at 4.1% in June and core inflation excluding precious metals remained further lower around 2.3-2.5%, the RBI said.

While concerns have grown over the likely higher core inflation, the governor said the Monetary Policy Committee's framework is clear and remains the same -- the target is headline inflation, not core or core excluding precious metals. "We will continue to be guided by the headline inflation, and it is our endeavour to bring headline inflation in line with the target in the medium term," he said. 

The RBI's rate-setting panel Wednesday left the policy repo rate unchanged at 5.25% in a unanimous decision while retaining the "neutral" policy stance despite inflation likely to be higher in the near term. Malhotra said there was a need for greater clarity on inflation -- its path and composition -- before taking any policy action.

The central bank cut the outlook for the financial year 2026-27 (Apr-Mar) headline inflation by 10 basis points to 5.0% earlier in the day even as uncertainties led by El Nino weather phenomenon and the war in West Asia continue to linger. Volatile oil prices and their second-round effects continue to pose downside risks, Malhotra said, adding that inflation was seen rising in the near term. The central bank also cut the inflation forecast for Jul-Sept by 40 bps to 4.7%.

Speaking about US tariffs, Malhotra said the current inflation projections take into account the tariffs imposed by Washington. The US is India's largest export destination and, currently, Indian goods attract 18% tariff, along with an additional 10% for New Delhi's failure to entirely prohibit the import of goods produced with forced labour.

Malhotra said that effective tariffs imposed by the US on India are not "as much", thanks to sector-specific or country-specific exemptions. "And so the impact may not be as high as the headline tariffs may suggest," he said. Besides, the effective tariff could be further lowered under the bilateral trade agreement that is under discussion, he said. 

Negotiations for the trade pact have seen many ebbs and flows, with the two countries having major differences over opening up India's sensitive agriculture sector to Washington's genetically modified products. The Donald Trump administration's steep reciprocal tariffs and Section 301 probe against India on the failure to effectively prohibit the import of goods manufactured using forced labour have added to the complexity of finalising a deal.

The two countries had on Feb. 7 issued a joint statement agreeing on a framework for an interim agreement for mutually beneficial trade but are yet to finalise the first phase of the agreement. India and the US had total trade of $132.14 billion in FY26, with India exporting $86.51 billion in goods to the US and importing $45.63 billion from the world's largest economy. 

US$1 = INR 95.15

Reported by Priyasmita Dutta

Edited by Rajeev Pai

TO RESUME LICENSING OF URBAN CO-OP BANKS THROUGH ON-TAP BASIS

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The Reserve Bank of India will resume issuance of fresh licences to urban co-operative banks after a two-decade pause, RBI Governor Sanjay Malhotra said in his policy statement Wednesday. The issuances will be made on an 'on-tap' basis, the central bank said. The RBI will shortly issue draft directions on the same for stakeholder consultation, it said in the statement on developmental and regulatory policies.

In January, the RBI had released a discussion paper seeking feedback on whether it should recommence licensing of new urban co-operative banks. It had also asked for the eligibility criteria for such licensing, if resumed. The RBI had stopped issuance of new urban co-operative bank licences in 2004 due to the growing financial instability of these banks.

"Considering the positive developments in the sector during the last two decades and in response to the growing demand from the stakeholders, we propose to publish a discussion paper on licensing of new UCBs," RBI Governor Sanjay Malhotra had said in his policy statement in October 2025.  

Reported by Cassandra Carvalho

Edited by Himanshi Gupta

NEW LOAN INTEREST RATE NORMS FOR STANDARDISATION, CONSUMER SAFETY

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Reserve Bank of India Governor Sanjay Malhotra Wednesday said the central bank's proposed norms on loan interest rate calculations are intended to standardise practices across regulated entities and strengthen consumer protection, adding that the framework will not result in any major substantive changes. 

Responding to queries during the post-monetary policy press conference, Malhotra said the draft guidelines were prompted by the compression in net interest margins, which had highlighted the need for greater standardisation in the way loan interest rates are calculated and disclosed. He said the proposed framework would bring uniformity across all RBI-regulated entities. 

"The exercise is essentially a rationalisation that will help consumer protection," Malhotra said, adding that the objective is to standardise rules applicable to regulated entities rather than introduce fundamental changes in loan pricing. 

He clarified that there would be "no major change" arising from the proposed norms on interest calculation and said market participants should wait for the draft guidelines for detailed provisions. The governor also said the proposed framework is largely conduct-related and should not be interpreted as introducing substantive changes to existing lending practices.

Deputy Governor Shirish Chandra Murmu said the RBI would release the draft guidelines on loan interest rate calculations shortly, following which stakeholders would get a clarity on the detailed provisions. 

The RBI's Monetary Policy Committee Wednesday left the policy repo rate unchanged at 5.25%. The MPC also decided to retain the neutral stance to respond appropriately to macroeconomic developments. 

Reported by Kabir Sharma

Edited by Akul Nishant Akhoury

TOP 10 ANNOUNCEMENTS BY GOVERNOR MALHOTRA AFTER MPC MEET

=========================================================

Following are the top 10 announcements by Reserve Bank of India Governor Sanjay Malhotra Friday in his address at the conclusion of the Monetary Policy Committee's third bi-monthly meeting for the financial year 2026-27 (Apr-Mar):

INTEREST RATES

The Reserve Bank of India's Monetary Policy Committee left the policy repo rate unchanged at 5.25% in a unanimous decision. The Standing Deposit Facility rate and Marginal Standing Facility rate remain unchanged at 5.00% and 5.50%, respectively.

POLICY STANCE

The Reserve Bank of India's Monetary Policy Committee decided to continue with its "neutral" policy stance.

GROWTH

The Reserve Bank of India projected GDP growth for FY27 at 6.7% from 6.6% earlier, with the June quarter growth at 7.0%, up from 6.6% earlier. The central bank projected GDP growth for the September quarter at 6.4%, up from 6.3% earlier. GDP growth for the December and March quarters is seen at 6.5% and 6.8%, respectively, unchanged from earlier. Growth for the FY28 June quarter is seen at 7.3%.

INFLATION

The Reserve Bank of India projected its headline inflation for FY27 at 5.0%, against 5.1% earlier. The central bank projected headline inflation for the September quarter at 4.7% from 5.1% earlier. The headline inflation for the December and the March quarter of the current financial year are seen, respectively, at 5.9% and 5.5%. Core inflation for FY27 is seen at 4.3%, down from 4.7% earlier. 

Going forward, the impact of El Nino on temporal and spatial rainfall distribution continues to be a major risk, although proactive supply management and adequate stock of foodgrains should provide comfort. Global oil prices have remained highly volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook. Although generalised inflation pressures continue to remain modest, the risks of second-round impact of higher food, fuel, and other input prices translating to broad-based inflation persist.

LIQUIDITY

The Reserve Bank of India will proactively ensure sufficient liquidity in the banking system through its two-way operations. System liquidity, as measured by the net position under the liquidity adjustment facility, stood at an average daily surplus of INR 1 trillion since the last meeting of the Monetary Policy Committee in June. Going forward, usual return of currency during the monsoon, drawdown of government cash balances, and RBI's special measures to attract capital inflows are expected to aid banking system liquidity.

EXCHANGE RATE

The Reserve Bank of India will continue with its policy of being determined by market forces while curbing excessive volatility, checking speculative behaviour, and preventing disorderly movements to ensure it is not out of sync with fundamentals or disruptive of economic activity. For this purpose, the central bank has a broad range of effective regulatory and market-based instruments.

CO-OPERATIVE SECTOR

The Reserve Bank of India will soon issue draft guidelines for resuming licensing of urban co-operative banks. The central bank will also issue draft directions for rural co-operative banks.  

INTEREST RATE ON ADVANCES

To enhance transparency in lending rates and strengthen consumer protection, the Reserve Bank of India has proposed harmonising and standardising the regulatory framework on interest rates on advances for all regulated entities.

EXTERNAL SECTOR

During Apr-May, the current account recorded a surplus of $ 2.8 billion, primarily led by robust surplus in the services trade and strong remittance receipts. Going forward, moderation in global trade growth, surge in energy prices, and persistent trade policy uncertainties pose upside risks to India's current account deficit in FY27.

FINANCIAL STABILITY

The system-level financial parameters related to capital adequacy, liquidity, asset quality, and profitability of scheduled commercial banks continue to remain healthy, although there is some moderation in net interest margins as compared to FY26. 

Compiled by J. Navya Sruthi

Filed by Rajeev Pai

PROJECTS FY27 GDP GROWTH AT 6.7%, INCREASES ESTIMATES FOR Q1, Q2

================================================================

The Reserve Bank of India Wednesday increased the GDP growth forecast for 2026-27 (Apr-Mar) to 6.7% from 6.6% earlier. The central bank also increased its growth estimates for the June quarter to 7.0% from 6.6% and that for the September quarter to 6.4% from 6.3%. 

The RBI projected growth of 6.5% for the December quarter and 6.8% for the March quarter. Conflict in West Asia, volatile oil prices, sticky inflation expectations, and fragile public finances in systemic economies pose significant downside risks to the outlook, RBI Governor Sanjay Malhotra said. 

RBI reiterated confidence in the country's growth outlook, saying resilient domestic demand, sustained expansion in manufacturing and services, and robust exports continue to underpin economic activity despite heightened global uncertainties. Malhotra said India remains the world's fastest-growing major economy.

In his monetary policy statement, the governor said, "Growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India's position as the world's fastest-growing major economy."

The governor acknowledged that while domestic growth remains resilient, the outlook has weakened amid global and domestic risks. "Growth, albeit resilient, is expected to be lower in 2026-27. The outlook, however, is hazy because of the uncertainties regarding Southwest monsoon, El Nino, geopolitics and global trade policy," he said, adding that policymakers require "greater clarity" on the inflation trajectory before taking any policy action.

Reviewing the current state of the economy, Malhotra said the easing of supply-side disruptions since June had supported domestic activity, although renewed escalation of the conflict in West Asia since early July had increased volatility in energy prices and revived concerns over global supply chains. Despite these headwinds, he said high-frequency indicators pointed to resilience in the economy during the June quarter. "Amidst persistent global uncertainty, domestic economic activity has exhibited resilience as reflected by the high-frequency indicators available for Q1, 2026-27," the governor said.

He noted that early corporate earnings indicated healthy manufacturing performance, services activity continued to gather momentum on the back of strong domestic demand, private consumption remained supported by buoyant discretionary spending, investment activity was steady due to robust government infrastructure spending, and merchandise exports had rebounded with double-digit growth while services exports maintained momentum. "Overall, the India economy performed better than expected in Q1," he said.

Looking ahead, Malhotra flagged several risks to growth, particularly an uneven and deficient Southwest monsoon under El Nino conditions and renewed geopolitical tensions. However, he said multiple domestic factors should help cushion the economy. He said government initiatives on climate-resilient agriculture, continued strength in services, steady employment conditions, robust credit flows, sustained infrastructure spending and stronger external demand supported by bilateral trade agreements and market diversification would help maintain growth momentum. At the same time, "Renewed tensions in West Asia which are disruptive of global supply chains, volatility in international financial markets, and weather-related shocks, however, pose downside risks to growth," he said. 

Concluding his remarks on the economy, the governor said the West Asia conflict had adversely affected the domestic growth outlook but stressed that India's macroeconomic fundamentals remained strong.

"While these have impacted the domestic growth-inflation outlook adversely, the stronger macroeconomic fundamentals of the Indian economy are helping navigate this global shock resolutely," he said. Malhotra added that the current environment presents "an opportunity to accelerate measures to enhance our resilience to withstand such shocks" and affirmed that the RBI would continue implementing policies to support sustainable growth. 

Reported by Kabir Sharma and Vaishali Tyagi

Edited by Deepshikha Bhardwaj

RBI WILL PROACTIVELY ENSURE ENOUGH SYSTEMIC LIQUIDITY – MALHOTRA

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The Reserve Bank of India will proactively ensure sufficient liquidity in the banking through its two-way operations, Governor Sanjay Malhotra said Wednesday in his address at the conclusion of the Monetary Policy Committee's third bi-monthly meeting for 2026-27 (Apr-Mar). The central bank is guided by the objective of aligning the weighted average call rate to the policy repo rate, Malhotra said.  

"System liquidity, as measured by the net position under the LAF (liquidity adjustment facility), stood at an average daily surplus of 1.0 lakh crore (INR 1 trillion) since the last MPC meeting in June 2026," Malhotra said. Going forward, the governor expects the usual return of currency during the monsoon, drawdown of government cash balances, and the central bank's special measures to attract capital inflows are expected to aid banking system liquidity.

The banking system liquidity since Friday rose to the highest level since Apr. 20 on the back of foreign currency non-resident bank deposit flows. The net liquidity absorbed by the RBI--a proxy for liquidity surplus--was at INR 3.34 trillion Tuesday, sharply up from INR 2.44 trillion Monday. Outstanding FCNR(B) deposits rose by $28 billion between Jun. 5 and Thursday to $60.55 billion, according to a written reply by Minister of State for Finance Pankaj Chaudhary in the Lok Sabha.    

The governor said since the last policy, which was on Jun. 5, the weighted average call rate traded within the liquidity adjustment facility corridor averaging at 5.31%. "Short-term money market rates, especially rates of commercial papers and certificates of deposit, moderated in July," Malhotra said. 

Reported by J. Navya Sruthi

Edited by Deepshikha Bhardwaj

TO ISSUE DRAFT NORMS ON CREDIT OVERSIGHT ON RURAL COOPERATIVE BKS

=================================================================

The Reserve Bank of India Governor Sanjay Malhotra Wednesday said the central bank will issue draft amendment directions on credit oversight in rural cooperative banks after undertaking a comprehensive review of the credit monitoring arrangement, while addressing the prudential concerns arising from concentrated lending. The credit monitoring arrangement instructions were last revised in 2008.

"As the banking sector in general, and co-operative banking sector in particular, have undergone significant expansion and changes since then, it has been decided to review these instructions, keeping in view the objectives of developing a vibrant co-operative sector while addressing the prudential concerns arising from concentrated lending," the statement on Developmental and Regulatory Policies said. 

Reported by Nandini Sinha

Edited by Akul Nishant Akhoury

PROPOSE TO HARMONISE FRAMEWORK OF INTEREST RATES ON ADVANCES

============================================================

The Reserve Bank of India has proposed to rationalise the regulatory framework governing interest rates for all regulated entities on a principle-based approach. The aim is to harmonise guidelines across regulated entities while keeping proportionality intact, the RBI said.

"In order to enhance transparency in lending rates and strengthen consumer protection, it is proposed to harmonise and standardise the regulatory framework on interest rates on advances for all regulated entities," Governor Sanjay Malhotra said while detailing the third bi-monthly Monetary Policy Committee outcome Wednesday.

The central bank's proposed rationalisation framework also aims to address certain operational aspects of the current framework on marginal cost of funds-based lending rate and external benchmark lending rate, and to standardise divergent market practices on interest charging, including day count conventions and benchmark reset dates.

The central bank said these steps are aimed at bringing uniformity, improving transparency in loan pricing, strengthening monetary transmission, and enhancing consumer protection. Draft directions will be issued soon for public comments, the RBI said. 

Reported by Vaishali Tyagi

Edited by Deepshikha Bhardwaj

CUTS FY27 CPI VIEW TO 5%, Q2 TO 4.7%; EL NINO, WAR RISKS LINGER

===============================================================

The Reserve Bank of India Wednesday cut the outlook for 2026-27 (Apr-Mar) headline inflation by 10 basis points to 5.0% even as El Nino and West Asia war-led uncertainties continued to linger, Governor Sanjay Malhotra said. Volatile oil prices and its second-round effects continue to pose downside risks, he said, adding that inflation was seen rising in the near term. The central bank also cut the inflation forecast for Jul-Sept by 40 bps to 4.7%.

"To sum up, even though headline inflation is projected to increase, it is primarily on account of supply-side pressures caused by food and fuel; it is not getting broad-based," the RBI Governor said after the third bi-monthly meeting of the Monetary Policy Committee for FY27. "Although generalised inflation pressures continue to remain modest so far, the risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation persist," Malhotra said.

Despite inflation likely to be higher in the near term, the RBI's Monetary Policy Committee Wednesday left the policy repo rate unchanged at 5.25% in a unanimous decision, while also retaining the "neutral" policy stance. "The MPC underscored that it will maintain a close vigil and remain resolute in its commitment to align inflation with the target," Malhotra said in his statement.

Malhotra said that there was a need for greater clarity to emerge regarding inflation--its path and composition before taking any policy action. "Any such action would also have to consider the need for recalibration of policy rates in line with the evolving growth-inflation dynamics, especially the normalisation of the underlying inflation from its benign levels seen hitherto," he said.

Latest data showed retail inflation maintained its upward trajectory in June, crossing the RBI's medium-term target of 4% for the first time in 17 months. Headline inflation rose to 4.38% on year in June, an 18-month-high, from 3.93% in May. At 4.38% for June, CPI inflation averaged 3.93% for the June quarter, lower than the RBI's projection of 4.2%. "The realised inflation for Q1, however, remained marginally lower than projections, reflecting limited pass-through of cost pressures," Malhotra said.

According to economists, headline inflation is seen rising to 4.5–4.9% in July, topping the print of June, which was sharply high due to war-led food and fuel inflation continuing to seep into consumer prices.

The quarterly break-up of the central bank's latest inflation forecasts is as follows--4.7% for Jul-Sept, 5.9% for Oct-Dec and 5.5% for Jan-Mar. It had previously forecast inflation in the second quarter of FY27 to average 5.1%, the third quarter at 5.9%, and the fourth quarter at 5.4%. Malhotra also projected core inflation to average 4.3% in FY27, 40 bps lower than the earlier projection. "Core inflation, excluding precious metals, is expected to be lower in the near term, suggesting that demand pressures remain contained," the governor said.

"As projected earlier, headline inflation is expected to rise further in the near term and peak in Oct-Dec, primarily due to food and fuel, before moderating thereafter," he said. The underlying inflation is likely to align with core inflation towards the end of the financial year, he added. The RBI projected inflation in Apr-Jun of FY28 to average 5.3%. 

India has been facing higher price pressures after the West Asia war started at the end of February. Global crude oil prices surged to as much as $123 a barrel after the war started from the sub $73 a barrel before Feb. 28. Since then, oil prices have seen much ebb and flow and were trading around $79 per barrel Wednesday. While the oil prices have cooled off from the highs, they remain volatile, with any flare-ups in the West Asia war impacting their levels. "Global oil prices have remained highly volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook," Malhotra said.

To add to this, India is facing super El Nino conditions this year. The India Meteorological Department has projected the southwest monsoon rainfall to be below normal at 90% of the long-period average. According to the governor, El Nino's impact on temporal and spatial rainfall distribution continues to remain a major risk for India. "...although proactive supply management and adequate stock of foodgrains should provide comfort," he said.

All said, while global uncertainties have impacted India's domestic growth-inflation outlook adversely, the stronger macroeconomic fundamentals of the Indian economy are helping navigate this global shock resolutely, the governor said. "We shall continue to implement policies that further fortify our economy. Whether it is facilitating sustainable growth or promoting consumer protection; whether it is preserving the stability of prices, the financial system or the currency, we will do whatever it takes to ensure the same," he said. 

US$1 = INR 95.07

Reported by Priyasmita Dutta

Edited by Akul Nishant Akhoury

EXCERPTS ON GROWTH FROM MPC'S STATEMENT

=======================================

Following are excerpts on growth from the statement issued by the Reserve Bank of India Friday at the conclusion of the Monetary Policy Committee's third bi-monthly meeting for the financial year 2026-27 (Apr-Mar):

Real GDP growth for 2026-27 (Apr-Mar) is projected at 6.7%, with Apr-Jun at 7%; Jul-Sept at 6.4%; Oct-Dec at 6.5%; and Jan-Mar at 6.8%. Prolonged global supply chain disruptions, heightened volatility in global financial markets, and weather-related shocks continue to pose downside risks to the domestic growth outlook.

As for growth, elevated energy prices coupled with global supply constraints are having adverse spillovers on economic activity. While domestic demand remains resilient and manufacturing and services sectors activity continues to expand, there are incipient signs of moderation in some sectors as suggested by high-frequency indicators.

Compiled by Janwee Prajapati

Filed by Himanshi Gupta

EXCERPTS ON INFLATION FROM MPC'S STATEMENT

==========================================

Following are the excerpts on inflation from the statement issued by the Reserve Bank of India Wednesday at the conclusion of the Monetary Policy Committee's third bi-monthly meeting for 2026-27 (Apr-Mar):

While CPI inflation increased to 4.4% in June 2026 after remaining below the target for 16 consecutive months, it turned out to be lower by 30 basis points than what was earlier projected for first quarter of 2026-27 (Apr-Mar). The increase in June was primarily due to higher food and fuel inflation. The increase in food inflation was broad-based with most constituents witnessing price pressures during May-Jun. Fuel inflation also rose, driven by revision in retail prices, following the sharp spike in international energy prices. It also led to higher inflation in select categories such as restaurant charges. Despite the pressure from higher input costs, core (CPI excluding food and fuel) inflation remained unchanged at 3.9% during May-Jun. Excluding precious metals, core inflation remained even lower at 2.3-2.5% during this period.

Going forward, El Nino's impact on temporal and spatial rainfall distribution continues to remain a risk, although proactive supply management and adequate stocks of foodgrains could provide buffers. Global oil prices have remained volatile with sharp two-way movements triggered by geopolitical developments, blurring the near-term outlook. Although generalised inflation pressures continue to remain modest so far, the risks of higher food, fuel and other input prices translating into a broad-based increase in inflation persist.

Considering all these factors, CPI inflation for 2026-27 (Apr-Mar) is projected to be 5.0% with September quarter at 4.7%; December quarter at 5.9%; and March quarter at 5.5%. Inflation for first quarter of 2027-28 (Apr-Mar) is projected at 5.3% with risks being evenly balanced. Core inflation is projected at 4.3% for 2026-27 (Apr-Mar). Core inflation, excluding precious metals, is expected to be lower in the near term, suggesting that demand pressures remain contained.

Headline CPI inflation edged up above the target, as expected. The realised inflation for the first quarter, however, remained marginally lower than projections reflecting limited pass-through of cost pressures. The higher inflation is mostly on account of fuel and food with little signs of generalisation of price pressures so far. Core inflation excluding precious metals continues to be benign. As projected earlier, headline inflation is expected to rise further in the near term and peak in the third quarter of FY27, primarily due to food and fuel, before moderating thereafter. The underlying inflation, reflected by core inflation excluding precious metals, which has been benign for some time, is likely to align with core inflation towards the end of the financial year. 

Compiled by Diksha Tripathy

Filed by Akul Nishant Akhoury

End

US$1 = 95.11

Compiled by Mansi Patil and Shaheed Shaikh

Filed by Rajeev Pai

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