The Reserve Bank of India (RBI), in its third bi-monthly meeting this year, maintained the status quo. It has kept the repo rate unchanged at 5.25% for the third consecutive time and upgraded the FY27 growth forecast to 6.7%.
The Monetary Policy Committee (MPC) chose to wait for greater clarity on the inflation outlook amid rising risks from food prices, volatile crude oil prices and an uncertain global environment. The committee also retained its ‘Neutral’ policy stance.
The Standing Deposit Facility (SDF) rate remains at 5%, while the Marginal Standing Facility (MSF) rate and the Bank Rate continue at 5.5%.
Here are 5 key highlights from the announcements made by the RBI Governor Sanjay Malhotra.
1. RBI lowers FY27 inflation forecast to 5%, warns of upside risks
The RBI projected consumer price inflation (CPI) at 5% for FY27 down from 5.1% projected earlier.
It expects inflation at 4.7% in the second quarter, 5.9% in the third quarter and 5.5% in the fourth quarter. Inflation for the first quarter of FY28 is projected at 5.3%.
The central bank noted that although headline inflation has moved above the 4% target, underlying inflation remains moderate. It also warned that higher food and fuel prices could eventually spill over into other sectors.
“Although generalised inflation pressures continue to remain modest so far, the risks of second-round impact of higher food, fuel and other input prices translating to broad-based inflation persist,” Malhotra said.
2. Growth remains resilient despite global uncertainties
The RBI raised its GDP growth projection for FY27 to 6.7% from 6.6% projected earlier.
It expects GDP growth at 7% in the first quarter, 6.4% in the second quarter, 6.5% in the third quarter and 6.8% in the fourth quarter.
Though RBI said that India’s economy continues to remain resilient, despite global headwinds.
“Growth continues to be supported by resilient domestic demand, sustained expansion in manufacturing and services activity, and robust exports, reaffirming India’s position as the world’s fastest-growing major economy,” the Governor said.
3. Liquidity conditions likely to stay supportive: RBI
The RBI expects banking system liquidity to remain comfortable in the coming months, supported by the seasonal return of currency during the monsoon, drawdown of government cash balances and the central bank’s recent measures to attract capital inflows.
RBI said it will continue to proactively manage liquidity through two-way operations to ensure adequate funds remain available in the banking system. Its objective is to keep the weighted average call rate (WACR) aligned with the policy repo rate.
System liquidity, as measured by the net position under the LAF, stood at an average daily surplus of Rs 1.0 lakh crore since the last MPC meeting in June 2026, according to RBI.
4. External sector remains stable
The RBI said India’s external sector continues to remain resilient despite global uncertainties. It noted that the current account recorded a surplus during April-May, supported by strong services exports and healthy remittance inflows.
India’s foreign exchange reserves stood at $692.9 billion as of July 31.
On the rupee, Malhotra reiterated that the exchange rate will remain market determined.
“We will continue with our policy of it being determined by market forces, while curbing excessive volatility, checking speculative behaviour and preventing disorderly movements,” he said.
5. El Nino and West Asia remains key risks
The RBI noted that several uncertainties including the West Asia conflict, fresh US tariffs, volatile crude oil prices, disruptions to global supply chains, El Nino conditions and an uneven southwest monsoon continue to cloud the economic outlook.
The RBI said these factors could affect both inflation and economic growth over the coming months.
Conclusion
RBI Governor Sanjay Malhotra said the central bank decided to hold rates because the recent rise in inflation has largely been driven by food and fuel prices and has not yet become broad-based. He added that inflation is expected to rise further in the coming months and peak during the third quarter of FY27 before moderating.
“There is a need for greater clarity to emerge, especially regarding inflation, its path and composition before taking any policy action,” Malhotra said.