The Reserve Bank of India’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.25%, signalling a preference for stability as growth remains strong and inflation is benign but global risks stay elevated.

What did the RBI decide?

• The MPC unanimously voted to keep the policy repo rate at 5.25%, with the policy stance retained as “neutral”.

• Consequently, the Standing Deposit Facility (SDF) rate stays at 5.00%, and the Marginal Standing Facility (MSF) / Bank Rate remain at 5.50%.
• This is the first policy of 2026 and comes after a cumulative 125 bps of rate cuts since early 2025, as the RBI shifted from a tightening phase to a growth‑supportive easing cycle.

Why has the repo rate been kept at 5.25%?

1. Inflation remains “benign”

• Governor Sanjay Malhotra noted that headline CPI is below the 4–6% tolerance band and remains benign, giving the RBI room to pause further action.
• The MPC expects CPI inflation to stay around 4.0% in Q1 FY27 and 4.2% in Q2 FY27, even as India transitions to a new CPI series, with core inflation seen range‑bound.[]​

2. Growth momentum is strong

• Real GDP growth is projected at 7.4%, driven by resilient domestic demand, strong services, and a nascent revival in manufacturing and construction.[]​
• Real GVA growth is estimated at 7.3%, with services leading and manufacturing showing signs of a durable recovery.[]​
• The RBI believes earlier rate cuts (total 125 bps) are still working through the system and wants more time for transmission rather than rushing further action.

3. External risks and trade tailwinds

• The policy comes soon after major trade deals with the US and EU, including a sharp reduction in US tariffs on Indian goods from ~50% to about 18%, which should support exports and growth.
• At the same time, the RBI flagged escalating geopolitical tensions, volatile global markets and bond‑market concerns around fiscal sustainability, which argue for a cautious stance.

What does this mean for borrowers and depositors?

Home loan and other EMIs

• Since the repo rate is unchanged at 5.25%, existing floating‑rate loans linked to repo (RLLR/EBLR home loans, LAP, MSME loans) are unlikely to see any immediate change in interest rates or EMIs.
• The current pause follows a full easing cycle of 125 bps cuts since February 2025; much of that has already translated into lower EMIs over the past year.
• New borrowers continue to benefit from the lowest policy rate in this cycle, but the scope for further sharp EMI reductions has now narrowed unless growth or inflation data weaken significantly.

Fixed deposits and savings rates

• Banks generally move FD and savings rates in line with the repo and system liquidity. With the RBI holding at 5.25% and liquidity still comfortable, deposit rates are likely to remain broadly stable, with only marginal tweaks based on bank‑specific needs.

Key takeaways from this policy

• Stability over surprise: After aggressive easing in 2025, the RBI is signalling that 5.25% could be the “terminal rate” for this cycle unless there is a major shock.[]​

• Neutral stance: A neutral stance means the RBI is not pre‑committing to either further cuts or hikes; it will remain data‑dependent on inflation, growth and global conditions.
• Supportive macro backdrop: Inflation is under control, growth is strong, fiscal consolidation has been reaffirmed, and FX reserves are at record highs, giving the RBI policy space if conditions change.

How markets and sectors are reacting

• Equity markets largely expected a pause; indices ended in the green after the announcement, as the decision reinforced the perception of macro stability.

• Bond markets welcomed the continuity, though investors remain watchful about fiscal dynamics and global yields; the unchanged MSF/SDF corridor helps anchor short‑term rates and liquidity expectations.
• Real estate and housing players see the steady repo rate as positive for premium housing, since stable borrowing costs improve visibility for homebuyers and developers.[]​
• NBFCs and banks gain from clarity on the rate path, which aids in pricing loans, raising capital and managing ALM.

Conclusion: What should you do as an investor or borrower?

• Borrowers: Don’t expect immediate EMI relief from this policy; instead, use the current lower‑rate environment to prepay high‑cost debt or shorten your loan tenure where possible.

• Homebuyers: This is a supportive window—rates are well below the peak of 6.5%, and the RBI is signalling an extended pause, which helps long‑term planning.
• Investors: For debt, prefer a barbell approach—combine short‑duration funds (for flexibility) with selective long‑duration exposures to benefit if the pause extends and yields stabilise. For equities, banks, NBFCs, real estate, and rate‑sensitive sectors remain in focus as long as growth stays near 7–7.5%.

Overall, the February 2026 monetary policy reinforces that India is currently in a “goldilocks” zone of strong growth and contained inflation, and the RBI wants to preserve that balance by holding the repo rate at 5.25% and keeping its stance neutral but watchful.

Strengths of RBI's Unchanged Repo Rate Decision

• Macro stability preserved: 5.25% anchors inflation expectations while supporting 7.4% GDP growth trajectory.
• Transmission complete: 125 bps prior cuts fully working through banking system; no need for disruptive moves.
• Borrower relief sustained: Home loans, MSME credit remain at cycle lows without reversal risk.
• Investor clarity: Neutral stance = no surprises; markets can price in steady rates + growth.
• FX reserve buffer: Record forex reserves provide policy flexibility if global shocks hit.
• Fiscal synergy: Complements Budget 2026's manufacturing push without overheating.

Risks of RBI's Current Stance

• Delayed growth support: If global slowdown hits exports/capex, pause may need reversal (hurting sentiment).
• Inflation surprises: Food/imported inflation spikes could force hikes, raising EMIs unexpectedly.
• Liquidity tightening: CRR/SDF adjustments needed if government spending accelerates.
• Bond yield pressure: Fiscal deficit concerns + steady rates may keep 10Y G-Secs elevated.
• NBFC funding costs: Marginal lenders face higher wholesale borrowing if deposit rates don't fall further.
• Rate cut expectations: Markets may price in premature cuts, creating volatility if RBI stays firm.

FAQs

1. What is the current repo rate after RBI MPC February 2026?
The repo rate remains unchanged at 5.25%, with policy stance neutral. SDF at 5.00%, MSF at 5.50%.

2. Why did RBI keep repo rate unchanged at 5.25%?
Benign inflation (below 4–6% band), strong GDP growth (7.4% projected), and global uncertainties warrant a pause after 125 bps cuts in 2025.

3. Will my home loan EMI change after this policy?
No immediate change for repo‑linked floating loans. Existing EMIs stay same; new loans benefit from lower policy rates.

4. What is RBI's inflation projection for FY27?
CPI inflation expected at ~4.0% Q1 FY27 and 4.2% Q2 FY27, with core inflation range‑bound.

5. How does unchanged repo rate impact fixed deposits?
FD rates likely stable; banks have limited room to cut deposits further with repo steady and liquidity comfortable.

6. Which sectors benefit from steady 5.25% repo rate?
Real estate, NBFCs, banks, auto, consumer durables gain from borrowing cost certainty and growth support.

7. When is next RBI MPC meeting?
April 2026 (bi‑monthly schedule). Next decision based on Q4 FY26 data and global developments.