RBI MPC meet concludes, repo rate unchanged

The RBI revised its CPI inflation projections slightly upward for the first and second quarters of the next fiscal year to 4% and 4.2%, respectively. Despite this modest adjustment, inflation is expected to remain manageable. 

The Reserve Bank of India (RBI) has decided on Friday to maintain its key policy repo rate unchanged at 5.25%, as announced by Governor Sanjay Malhotra following the Monetary Policy Committee (MPC) meeting held from February 4 to 6, 2026. The decision was unanimous, reflecting a careful evaluation of evolving macroeconomic conditions and the broader economic outlook. The MPC also opted to retain a neutral policy stance, signaling a balanced approach amid ongoing global uncertainties.

In his post-policy address, Governor Malhotra highlighted that external headwinds have intensified since the previous meeting, including geopolitical tensions, volatility in international financial markets, and shifting trade patterns. These factors pose risks to the growth outlook and customer protection. However, the successful completion of trade deals provides a positive boost to the overall economic perspective. 

Domestically, the inflation and growth outlook remains encouraging, with consumer price index (CPI) inflation staying benign and close to the target level. The RBI revised its CPI inflation projections slightly upward for the first and second quarters of the next fiscal year to 4% and 4.2%, respectively. Despite this modest adjustment, inflation is expected to remain manageable. 

On the growth front, India's economy continues its steady upward trajectory. Real GDP is projected to register significantly higher growth of 7.4% this year compared to the previous year, driven by resilient private consumption and fixed investment. Although net external demand has acted as a drag—with imports outpacing exports—supply-side momentum is strong, with real gross value added (GVA) estimated at 7.3%, supported by robust services sector performance and a revival in manufacturing. 

Looking ahead, economic activity is anticipated to remain resilient in the coming year. Private consumption and investment are expected to continue supporting growth, even as global challenges persist. Beyond the monetary policy decision, the RBI outlined several regulatory and developmental measures. To enhance customer protection in the banking sector, three draft guidelines will be issued: one on mis-selling practices, another on loan recovery and the engagement of recovery agents, and a third on limiting customer liability in unauthorized electronic banking transactions.

Additionally, a framework is proposed to compensate customers up to Rs 25,000 for losses in small-value fraudulent transactions. The central bank also plans to publish a discussion paper on measures to improve digital payment safety, potentially including lagged credits and extra authentication for vulnerable groups such as senior citizens. In the area of financial inclusion, the RBI has reviewed key schemes—including the Lead Bank Scheme, the CASAN credit card scheme, and the business correspondent model—and will issue revised draft guidelines. 

A unified portal is proposed for improved management of Lead Bank Scheme data. To support micro, small, and medium enterprises (MSMEs), the collateral-free loan limit is set to increase from Rs 10 lakh to Rs 20 lakh. Urban cooperative banks (UCBs), recognized as vital for financial inclusion, will benefit from raised limits on unsecured loans and loans to nominal members. Requirements related to tenor and moratorium on housing loans by Tier 3 and Tier 4 UCBs are proposed for removal. 

A new training initiative called "Saksham" (Sahakari Bank Sashaktikaran Mission) aims to build managerial and technical capacity by training over 140,000 participants, including officials, members, and directors. Non-banking financial companies (NBFCs) without public funds or customer interface and with assets up to Rs 1,000 crore are proposed for exemption from RBI registration. Certain NBFCs will no longer need prior approval to open more than 1,000 branches.

In financial markets, revised regulations for external commercial borrowings (ECBs) have been finalized and will be issued soon. The Rs 2.5 lakh crore limit under the Voluntary Retention Route (VRR) is proposed for removal, with investments in each security category aligned to general route ceilings. These announcements underscore the RBI's focus on balancing growth support, inflation control, financial stability, and consumer safeguards in a challenging global environment.