RBI MPC Meet Highlights: RBI Gov says rates may stay low for short to medium-term; don’t see need for further revision of governance norms for banks yet

Rajiv Sabharwal, MD and CEO, Tata Capital, said that at the onset of the new fiscal year, the RBI’s decision to keep the repo rate unchanged reflects a calibrated, watchful approach amid tumultuous geopolitical uncertainties.

"In a fluid global environment, this steady stance offers a timely cushion to the Indian economy, anchoring confidence for borrowers and financial institutions navigating evolving conditions.

While upside risks to inflation have inched up, it is reassuring to note the RBI’s measured view of India’s macroeconomic fundamentals. The stance balances growth considerations while retaining the flexibility to respond to changing situations.", Sabharwal added.

He added that the RBI’s parallel focus on regulatory simplification and ease of doing business, especially for MSMEs, is a positive structural move.

RBI announced a series of measures to ease compliance, improve liquidity, and support businesses.

It said it will simplify bank board processes to improve efficiency and reduce the regulatory burden by consolidating instructions. It also eased onboarding norms for MSMEs on TReDS platforms to improve access to invoice financing. RBI has also relaxed capital norms for banks. Additionally, it will widen participation in money markets to boost liquidity.

Governor Sanjay Malhotra said that the Reserve Bank did not come across any governance or conduct-related issues during the supervisory inspection of HDFC Bank.

Responding to a question at the post-monetary policy press conference on the sudden resignation of HDFC Bank Chairman Atanu Chakraborty and the subsequent fall in its share price, Malhotra said RBI had also seen minutes of meetings of the lender, and the RBI did not find anything of material concern.

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

"The RBI’s decision to maintain the repo rate and its Neutral stance did not come as a surprise and was already priced in. For now, we believe this could be the end of the rate cut cycle, and the RBI will pause rates from here. Although a 2-week ceasefire has been announced, risks persist, posing a downward risk to GDP growth estimates and an upward revision risk to inflation estimates. The RBI has already revised its Q1/Q2 inflation/GDP estimates to reflect the dynamic geopolitical risks. However, any further escalation in the West Asia conflict that negatively impacts inflation or GDP estimates could possibly prompt the regulator to reverse the rate cycle earlier than anticipated," said Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

“Gross FDI is doing very well; it should touch $100 billion next year. The capital account seems robust and current account deficit (CAD) seems manageable,” RBI Governor Sanjay Malhotra said while addressing the press conference adding that he is not at all concerned about BoP position.

We have sufficient forex reserves, eleven months covered, with no reasons of concerns. However, the war added that pressure, says governor on FX reserves. He adds that lot of investments are coming in with the FDI sector doing particularly well.

He adds that they are not at all concerned with the BoP position of the country. Further Malhotra adds that FPI outflows have mainly been on the equity side.

We don't think the growth projections are too optimistic but they have rather more risk to downside, the governor says commenting on the projected growth of 6.9% for FY27.

'We are coming up with a new framework for NBFCs soon... hopefully this month to categorise them into upper, middle and other layers,' RBI Governor Sanjay Malhotra said while addressing the press conference.

RBI said it has not found any material governance concern in HDFC Bank. "Banking system is very resilient, safe and strong.' RBI Governor said in the post policy announcement.

Recently HDFC Bank's Atanu Chakraborty stepped down as part-time (non-executive) chairman on March 18 citing differences related to “values and ethics.”

RBI gives projection of $85/bbl for crude oil for FY27. The governor says for next year the forecast stands at $75/bbl

“It’s quite possible that we are going to have low rates for a long time,” said the RBI Governor while addressing the press conference after the policy announcement, highlighting that various steps taken by the RBI and the government are expected to drive growth.

The governor said that it is likely that low policy rates will continue in the short to medium term, he added that resilience of the Indian economy forms a strong case for low rates for nearly 9-12 months owing to strong macro economic fundamentals.

"Noticed arbitrage positions being built up in the FX market in March,” said the RBI Governor while speaking to the media after the policy announcement on Wednesday.

"Acknowledging the risks to growth and inflation owing to disruption in energy and other supply chains, MPC decided to hold policy rates while awaiting further clarity on the impact of West Asian crisis. We do not see MPC hiking policy rates until CPI inflation durably surpasses 6% and inflation expectations get unhinged," said Garima Kapoor Deputy Head of Research and Economist at Elara Capital on the RBI Monetary Policy.

The analyst believes that 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.

RBI Governor announce that India’s foreign exchange reserves rose to $697.1 billion as of April 3. The reserves was at $688.06 billion as of March 27, down from a record high of $728.49 billion in late February, largely due to the RBI’s intervention to stabilise the rupee.

RBI Governor, Sanjay Malhotra in his speech said that the central bank has decided to expand participation base in term of money market, allowing NBFC, AIDIs and housing finance companies to enter this segment.

Currently, only banks and standalone primary dealers are allowed in this segment. The Indian central bank also enhanced the borrowing limit in the term money market for standalone primary dealers

"Aided by the 2-week ceasefire and the consequent crash in Brent crude to about $95 level, the RBI Governor sounded optimistic, though guarded, in his monetary policy message. 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," said Dr. V K Vijayakumar, Chief Investment Strategist, Geojit Investments.

He added that directives by the RBI earlier to curb excessive speculation in the currency markets have yielded results and the rupee has appreciated to 92.55 levels from 95.30 touched on March 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.

The supply shock may transform into a demand shock, the governor said, commenting on elevated crude oil prices and the recent West Asia crisis. He added that elevated commodity prices may impact growth this year.

RBI Governor Sanjay Malhotra said that India’s economic fundamentals remain strong compared to other economies and are better positioned than during previous crises.

“Before the outbreak of the West Asia conflict, India’s macroeconomic fundamentals exuded confidence, with buoyant growth and low inflation. However, conditions turned adverse in March with the widening of the conflict zone and its intensification,” Malhotra said while announcing the MPC policy decisions.

“The fundamentals of India are on a stronger footing at the current juncture than they were during previous crises, as well as compared to many peer economies, providing it with greater resilience to withstand shocks,” the RBI Governor added.

"The RBI’s decision to maintain the repo rate at 5.25% while retaining a neutral stance reflects a calibrated approach amid rising global uncertainties. While domestic growth remains resilient—with FY27 GDP projected at 6.9%—heightened geopolitical tensions and volatile crude prices warrant caution," said Ajit Mishra – SVP, Research, Religare Broking.

The analyst added that by staying on pause, the central bank aims to keep inflation aligned within its comfort band, even as it preserves flexibility to respond to external shocks and currency pressures, ensuring the Indian economy remains on a steady expansion path.

Governor said that the price of exchange rate remains unchanged despite the recent depreciation of the Indian rupee. The governor added that RBI would continue to intervene at regular intervals to ensure that excess volatility does not hamper with currency movements.

Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group said that the decision was largely inline with the expectations. "From here, the RBI is likely to continue with a data-dependent approach, suggesting an extended pause in rates. The broader policy stance is also likely to remain neutral, although liquidity conditions may continue to be managed in an accommodative manner. Overall, this policy mix appears neutral to marginally supportive for equities, fixed income and the foreign exchange market."

Repo rate: Unchanged at 5.25%
Stance: ‘Neutral’

Standing Deposit Facility (SDF): 5% (Unchanged)

Marginal Standing Facility (MSF) & Bank Rate: 5.5% (Unchanged)

Bank rate: 5.5% (Unchanged)

Inflation projections

FY27: 4.6%

Q1 FY27: 4%

Q2FY27: 4.4%

Q3FY27: 5.2%

Q4FY27: 4.7%

GDP projections

FY27: 6.9%

Q1 FY27: 6.8% Vs 6.9% earlier

Q2FY27: 6.7% Vs 7.0% earlier

Q3FY27: 7%

Q4FY27: 7.2 %

While speaking on the depreciating rupee, RBI Governor Sanjay Malhotra said that the RBI will judiciously continue to contain excessive or disruptive currency volatility.

RBI Governor Sanjay Malhotra, while speaking on the Iran–US war’s impact on India, said that supply chain disruptions due to the closure of the Strait of Hormuz—a key global supply route—could hit several sectors and hurt growth.

"We shall remain vigilant of evolving situation and put in place policies that prioritize best interest of the economy," RBI Governor added.

Indian equity markets surged in Wednesday's trade as the RBI MPC retained key policy rates. The Nifty 50 was up 758 points or 3.28% to trade at 23,882, while the BSE Sensex rocketed 2,589 points or 3.47% to trade at 77,205.

FY27: 4.6%

Q1 FY27: 4%

Q2FY27: 4.4% Vs 4.2% earlier

Q3FY27: 5.2%

Q4FY27: 4.7%

Q1 FY27: 6.8% Vs 6.9% earlier

Q2FY27: 6.7% Vs 7.0% earlier

Q3FY27: 7%

Q4FY27: 7.2 %

RBI Governor Sanjay Malhotra also announced real GDP growth projections under the new series, estimating FY26 growth at 7.6%.