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Informist, Wednesday, Oct. 7, 2026

MUMBAI - Anitha Rangan, chief economist, RBL Bank, said the following on the Reserve Bank of India's fourth bi-monthly monetary policy statement for 2026-27 (Apr-Mar) detailed Wednesday:

The RBI monetary policy delivered a 25 basis points hike, in line with expectations, with a unanimous vote. The RBI also changed its stance to 'calibrated tightening' on a four-two vote, which indicates that the prospective cycle is on the hiking side. The RBI has revised its inflation estimates upwards, to 5.6-6% from Q3 through Q1 FY28, which is above the 4% target. Growth has also been revised upwards to 7.1% for the year, with strong momentum into Q2 at 7.2%, moderating to 6.9% and 6.8% thereafter. This reflects robust growth despite geopolitical and weather-related shocks.

The key takeaway was the RBI's emphasis that current account deficit risks are elevated. The overall tone of the policy continued to acknowledge risks, both external and domestic. On the domestic side, these are largely led by El Nino, which is expected to extend into the rabi season.

The RBI did not announce any liquidity measures but stated that its objective is to keep the weighted average rate close to the policy rate. We expect liquidity measures to continue to moderate system liquidity. The RBI's observation that "transmission in the credit market reflected dissimilar movements in deposit and lending rates during July-August" suggests a preference for tighter liquidity, which is consistent with a calibrated tightening cycle in which liquidity is not in surplus.

This is a policy with a clear tightening bias, marking the start of a tightening cycle. The RBI is likely to pursue liquidity tightening and rate hikes in tandem, with at least 75 basis points more (cumulative 100 bps), to stay in sync with rising global yields. This would support the currency and also help attract capital flows, especially on the debt side.  End

Compiled by Arya S. Biju

Filed by Avishek Dutta

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