The Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday unanimously decided to keep the policy repo rate unchanged at 5.25 per cent, maintaining its neutral monetary policy stance as it assesses global economic risks, geopolitical tensions and inflation concerns.
Announcing the decision, RBI Governor Sanjay Malhotra said the committee had undertaken a detailed review of domestic and global economic conditions before arriving at the decision.
“After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to keep the policy repo rate under the Liquidity Adjustment Facility (LAF) unchanged at 5.25 per cent,” Malhotra said.
The Governor added that the Standing Deposit Facility (SDF) rate would remain at 5 per cent, while the Marginal Standing Facility (MSF) rate and the Bank Rate would continue at 5.5 per cent.
Explaining the MPC’s rationale, Malhotra pointed to a challenging global environment marked by uncertainty, supply chain disruptions, volatility in financial markets and subdued business sentiment.
“The global economy has been shaped by heightened uncertainty, disruptions to key trade routes and supply chains, increased market volatility, and cautious business sentiment. Let me at the very outset emphasise that the Indian economy entered this episode of global turbulence with much better fundamentals than in previous similar episodes,” he said.
The RBI Governor said India remains relatively well placed to navigate the current phase of global instability but stressed the need to strengthen economic resilience.
“It is important to not only confront and address these challenges, but also, at the same time, take this as an opportunity to further enhance our resilience,” he added.
Malhotra also highlighted continuing geopolitical tensions in West Asia, rising energy prices and global supply chain disruptions as risks facing the world economy.
According to the RBI, central banks across major economies are increasingly confronted with balancing growth concerns against inflation risks. The Governor noted that several advanced economy central banks may continue to maintain a cautious policy approach as they respond to evolving economic conditions.
He further observed that while global equity markets have remained buoyant, supported in part by optimism surrounding artificial intelligence-driven growth, bond markets continue to face pressure due to inflation concerns and questions over debt sustainability.
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