The Reserve Bank of India’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, concluded its February 2026 meeting with a decisive policy move, maintaining stability in the current rates.
The decision to keep key rates unchanged was widely expected as the central bank has already opted for a 125 basis points cut in the current 2025-26 fiscal year (FY26).
Following the rate action, the Standing Deposit Facility (SDF) stands at 5 per cent, while the Marginal Standing Facility (MSF) and the bank rate remained at 5.5 per cent each.
The MPC retained its ‘neutral’ stance and informed that the decision was taken unanimously by the committee.
Alongside these developmental measures, the Monetary Policy Committee explained the reasoning behind its decision to hold the policy rate steady.
External Pressures, But Domestic Stability
Policymakers noted that global headwinds have intensified since the previous meeting. Even so, the successful conclusion of key trade agreements has improved the broader economic outlook. Despite volatility in the global environment, the near-term domestic outlook for both growth and inflation remains constructive, the governor said.
Inflation Near Target, Underlying Pressures Contained
Headline inflation in November and December remained below the tolerance band of the inflation target. Although the projections for Q1 and Q2 of 2026-27 have been revised slightly upwards to 4.0 per cent and 4.2 per cent, respectively, inflation is still expected to stay close to the 4 per cent target.
The marginal upward adjustment is largely attributed to higher precious metal prices, estimated to be contributing around 60-70 basis points. Excluding this component, underlying inflationary pressures remain subdued, suggesting that broader price stability has not been compromised.
Growth Momentum Remains Intact
On the growth front, economic activity continues to display resilience. The First Advance Estimates indicate sustained momentum, driven primarily by domestic demand even as the external environment remains challenging. The overall growth outlook is assessed as favourable.
Policy Stance: Wait and Watch
After reviewing domestic macroeconomic conditions and the forward-looking outlook, Governor Malhotra explained that the MPC concluded the current policy rate to be appropriate. Accordingly, members voted to maintain the existing rate and retain the neutral stance.
The committee signalled that future decisions will depend on evolving macroeconomic data, including inputs from the new statistical series. In effect, the central bank has opted for continuity, balancing steady growth with inflation that remains broadly aligned with its target.
December MPC Recap
Notably, the MPC opted for a 25 bps cut in the key rates, slashing the repo rate to 5.25 per cent in the previous December MPC. The SDF rate was lowered to 5 per cent, while the MSF and bank rate were reduced to 5.5 per cent in the previous meeting of the committee.
Governor Malhotra also stated in December, “The MPC also decided to continue with a neutral stance. In view of evolving liquidity conditions, the Reserve Bank will conduct OMO purchases of government securities worth Rs 1 lakh crore and a three‑year rupee buy-sell swap of 5 billion US dollars this December to inject durable liquidity into the system. The MPC noted that headline inflation has eased significantly and is likely to remain softer than earlier projections.”
Alongside the rate decision, the committee revised its growth projections upward for the ongoing fiscal year. GDP growth for FY2025-26 was upgraded to 7.3 per cent, an increase of roughly half a percentage point from earlier estimates.
Quarter-wise projections were also outlined. Growth for Q3 of the current fiscal was pegged at 7 per cent, followed by 6.5 per cent in Q4. Looking ahead to FY2026-27, the MPC projected GDP expansion of 6.7 per cent in Q1 and 6.8 per cent in Q2.