The Reserve Bank of India (RBI), in its latest Monetary Policy Committee (MPC) meeting kept key policy rates unchanged and maintained a ‘Neutral’ stance. Experts ruled out scope for a rate hike in the near-term and believe the RBI could focusing on steps to support growth.
For FY27, the RBI projected a growth rate of 6.9%, supported by expansion in manufacturing and services.
However, the Governor, Sanjay Malhotra cautioned that supply risks, especially from elevated oil could impact other essential commodities like fertilizers.
Despite these challenges, Malhotra assured that the Indian economy remains resilient to supply shocks.
How are economists and Experts reading the RBI move
Here is a quick look at the top industry and Expert views on the RBI commentary and policy stance.
No Rate Hikes Until CPI Surpasses 6%
With elevated oil prices fuelling inflation concerns, some market participants speculated on potential rate hikes. However, the MPC opted to hold rates, awaiting further clarity on the West Asia crisis as the US and Iran announced ceasefire plans.
Garima Kapoor Deputy Head of Research and Economist at Elara Capital says there is no sight of rate hikes until CPI inflation durably surpasses 6% and inflation expectations get unhinged.
The analyst says, “We believe the 6.9% growth estimate put out by RBI for FY27 may need a reassessment as full pre-war energy export volumes might take 3–6 months due to backlog, diverted tankers, and partial infrastructure damage.”
West Asia Conflict Could Affect Credit Momentum
Naveen Kulkarni, Chief Investment Officer at Axis Securities PMS, noted that despite a two-week ceasefire, any escalation in the West Asia conflict could slow credit growth atleast in H1FY27. “Margins would remain divergent with SFBs (small finance bank) and Mid-sized private banks outperforming the larger banks,” he adds.
Kulkarni also said RBI’s decision to pause rates was expected and that the rate cut cycle will likely remain on hold. He emphasized monitoring net interest margin (NIM) movements in H1FY27, as Q4 is seasonally strong for asset quality, a trend expected to continue.
On stock selection, the brokerage prefers banks with diversified portfolios, strong deposit franchises, adequate capitalization, and attractive valuations.
“Presently, we prefer ICICI Bank, Kotak Mahindra Bank, and SBI amongst the larger banks, and Federal Bank, AU SFB, and Ujjivan SFB amongst the mid/smaller banks,” Kulkari adds.
Repo Rate Unchanged to Support Sustainable Recovery
Ajay Kumar Srivastava, Managing Director & CEO of Indian Overseas Bank, said, “The RBI’s decision to keep the repo rate unchanged at 5.25% reflects a balanced, ‘safety-first’ approach prioritizing macroeconomic stability.”
He added that steady rates reinforce the sustainability of the ongoing recovery while ensuring predictability in borrowing costs.
Kumar says that RBI’s removal of due diligence requirements for onboarding onto the TReDS platform is a progressive step that will significantly enhance liquidity access and working capital efficiency for small businesses.
“Further, measures aimed at simplifying banks’ capital management frameworks and broadening participation in the term money market will deepen financial markets, enhance systemic efficiency, and strengthen overall financial stability,” the banker said in a note
Falling Crude and Rupee Recovery Brighten Outlook
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investment, noted that Governor Malhotra sounded optimistic, aided by a drop in Brent crude prices.
“The ‘no rate change’ policy and the neutral policy stance are on expected lines. The projection of FY27 GDP growth rate at 6.9% and credit growth at around 14 % augur well for the stock market and financial stocks in particular,” the analyst adds.
Vijayakumar highlighted that RBI measures to curb excessive currency speculation have helped the rupee appreciate to 92.55 from 95.30. “The crash in crude and recovery in rupee is likely to stem the FPI outflows. Aggressive buying by DIIs and retail investors will keep the market resilient in the near-term,” Vijaykumar adds.