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Informist, Friday, Feb. 6, 2026

MUMBAI – The neutral stance of the Monetary Policy Committee shows panel members expect interest rates to stay at current levels going ahead, Reserve Bank of India Governor Sanjay Malhotra said Friday. Interest rates are seen at "low levels" for a long time and the committee will take decisions to further rate cuts from "policy to policy", he said. 

The Committee Friday left the policy repo rate unchanged at 5.25% in a unanimous decision. The committee also retained the 'neutral' policy stance even as external member Ram Singh was of the view that the stance be changed to accommodative from neutral.

Asked if the repo rate at 5.25% should be considered as the terminal rate, Malhotra said it is for the MPC to answer. "We will continue to be data dependent. We are at a neutral phase, other than one member who wanted to change the stance from neutral to accommodative," Malhotra said.

"All others are at neutral, which means given the state of economy that is today and that we forsee going ahead, over nine-month to one-year period, this is the rate that we expect to be there," the governor said. 

Malhotra said he expects policy rates to remain at low levels for a long period of time. "Whether they will go down even further, I will leave it for the MPC to decide going forward."

The Indian economy is in a good spot with underlying inflation seen staying benign, even as headline inflation may rise or fall, Malhotra said. Growth outlook, meanwhile, has improved since the last meeting of the rate-setting panel, the governor said. 
 

According to the RBI governor, the real rate of interest is still high. India's neutral rate of interest--the real interest rate that is neither expansionary nor contractionary for the economy-–was 1.4-1.9% during Jan-Mar 2024, according the last official central staff paper on real rates.

Real interest rate is the rate of return over and above the expected rate of inflation in an economy. "So if inflation going forward is 3-4%, then we are more or less neutral or below neutral rates. We continue to be in this space. We'll take it policy by policy," Malhotra said.  End

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

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