RBI Policy 2026: Repo Rate Decision and Key Updates

RBI Policy 2026: Repo Rate Decision and Key Updates

The Reserve Bank of India’s Monetary Policy Committee (MPC) concluded its first bi-monthly policy review of the calendar year 2026 on 5–7 February 2026, with the outcome announced on the afternoon of 7 February. The six-member panel, chaired by Governor Shaktikanta Das, voted unanimously to maintain the repo rate at 6.50 % for the sixth consecutive review. The stance was kept at “withdrawal of accommodation”, indicating that the MPC still sees the need to remain vigilant on inflation even as growth momentum remains steady.

The decision was widely anticipated by bond traders and economists after January retail inflation (CPI) came in at 5.1 % and wholesale inflation (WPI) at 3.8 %—both within or close to the RBI’s 4 % ± 2 % target range. Below is a detailed summary of the key policy announcements, macroeconomic projections, voting pattern, liquidity measures and market reaction.

Repo Rate & Policy Stance Unchanged

• Repo rate: 6.50 % (unchanged)
• Standing Deposit Facility (SDF) rate: 6.25 %
• Marginal Standing Facility (MSF) rate: 6.75 %
• Bank rate: 6.75 %
• Policy stance: Withdrawal of accommodation (unchanged)

Governor Das explained the decision in the post-policy press conference:

“Inflation remains vulnerable to food-price shocks, adverse weather events and global commodity volatility. While headline CPI has moderated, core inflation is still sticky at 4.8–5.0 %. The MPC judged that the current rate level continues to be appropriate to keep inflation on a sustained downward path toward the 4 % target while supporting growth.”

The 6–0 vote to hold rates was the third consecutive unanimous decision since October 2025.

Updated Macroeconomic Projections (2026–27)

The RBI revised its growth and inflation forecasts modestly:

Real GDP growth

• FY 2025–26 (full year): 6.9 % (unchanged from December projection)
• Q4 FY 2025–26: 6.7–6.9 %
• FY 2026–27: 6.8–7.2 % (base case 7.0 %)

CPI Inflation

• FY 2025–26 (full year): 4.8 % (revised down from 5.0 %)
• Q4 FY 2025–26: 4.6–4.8 %
• FY 2026–27: 4.2–4.6 % (base case 4.4 %)

Food inflation is projected to ease to 5.5–6.0 % in FY 2026–27 from 7.1 % in FY 2025–26, assuming normal monsoon and no major supply shocks.

Liquidity & Money-Market Measures

The RBI announced the following liquidity actions:

• Variable Reverse Repo Rate (VRRR) auctions — Weekly VRRR auctions will continue at 6.25 % to absorb surplus liquidity.
• Special Long-Term Repo Operations (SLTRO) — No fresh SLTRO announced; existing facilities remain available.
• Liquidity Adjustment Facility (LAF) — Corridor unchanged at 25 bps on either side of repo rate.
• Cash Reserve Ratio (CRR) — Maintained at 4.50 %.

Average daily liquidity surplus in the banking system stood at ₹1.92 lakh crore in January 2026, down from ₹2.4 lakh crore in December 2025 due to higher currency in circulation and GST outflows.

Market Reaction & Bond Yield Movement

• 10-year benchmark G-Sec yield closed at 6.74 % on 7 February (down 6 bps on the day, down 12 bps over the week).
• Nifty 50 rose 0.8 % to close at 25,120; Nifty Bank gained 1.1 %.
• Rupee strengthened marginally to ₹84.18–84.22 against the US dollar.
• 1-year OIS rate priced in 35–40 bps of rate cuts for calendar 2026 (unchanged from pre-policy levels).

Bond traders interpreted the unchanged stance and slightly lower inflation projection as “dovish hold”, opening the door for a potential 25 bps repo-rate cut in April or June 2026 if food inflation softens further.

Governor’s Press Conference Highlights

Governor Shaktikanta Das addressed several key topics:

• Food inflation outlook — “We expect kharif rabi crops to be normal. Vegetable and protein inflation should moderate from March–April.”
• Growth-inflation balance — “Growth is resilient; real GDP expanded 6.9 % in Q3 FY26. We see no reason to tighten policy, but premature easing could re-ignite inflation expectations.”
• Rupee stability — “Rupee remains broadly aligned with fundamentals. We will continue to intervene only to curb excessive volatility.”
• Digital rupee (e₹) — Pilot phase 2 (programmability, offline functionality) progressing well; wider retail rollout expected in H2 2026.
• Bank credit growth — 13.8 % YoY in December 2025; retail and services sectors leading.

Market & Economist Expectations for 2026

Consensus among bond desks and economists post-policy:

• Next rate cut: April or June 2026 (25 bps) — probability 65–70 %
• Terminal repo rate by end-2026: 6.00–6.25 %
• Peak inflation in 2026: 5.0–5.3 % (likely in March–April)
• Full-year CPI FY 2026–27: 4.3–4.6 %

Most analysts expect the MPC to remain data-dependent, with food-price trajectory and monsoon outlook being the decisive variables.

Conclusion

The RBI’s February 2026 policy decision to hold the repo rate at 6.50 % while maintaining a “withdrawal of accommodation” stance reflects a careful balancing act. Inflation remains the primary concern, but growth resilience and moderating core pressures provide room for cautious optimism. The MPC’s message is clear: premature easing will not be entertained, but the door to rate reduction stays ajar if incoming data cooperate.

For borrowers, home-loan and personal-loan rates are likely to remain in the 8.75–10.75 % range for the next 2–3 months. For investors, the bond market’s mild rally suggests a window to accumulate duration if a rate-cut cycle indeed begins in the first half of 2026.

With the Union Budget 2026–27 already presented and fiscal policy set, monetary policy now takes centre stage as the principal lever for managing India’s growth-inflation mix in the months ahead.