RBI holds the repo rate at 5.25% and keeps a neutral stance, citing a supply shock

The Reserve Bank of India left its policy rate unchanged on April 8, the first monetary policy decision of the financial year and the 60th meeting of the Monetary Policy Committee. The vote to hold the repo rate at 5.25 per cent was unanimous, and so was the decision to keep the stance neutral.

1. 1.5.25 per cent — the policy repo rate under the liquidity adjustment facility, unchanged.
2. 2.5.00 per cent — the standing deposit facility rate, unchanged.
3. 3.5.50 per cent — the marginal standing facility rate and the Bank Rate, unchanged.
4. 4.6.9 per cent — RBI's projected real GDP growth for 2026-27, after 7.6 per cent for 2025-26.
5. 5.4.6 per cent — projected CPI inflation for the current financial year.

The mechanism of the hold was described in the resolution as caution about a supply shock. The committee's language was that it is prudent to wait and watch the changing circumstances and the evolving growth-inflation outlook, and that it would respond judiciously to incoming information. Governor Sanjay Malhotra, in his post-policy remarks, named persistently elevated energy prices from the West Asia conflict and possible El Niño conditions as the principal upside risks to inflation, and said the conflict would weigh on growth.

The input-cost channel

The transmission the Governor described runs through costs rather than through demand. Higher energy prices, higher international freight and insurance costs and supply-chain disruption, he said, could constrain the availability of key inputs to downstream sectors and impair growth — a mechanism that shows up in output later rather than in the price index now. The committee's choice was to hold rather than to pre-empt either side of that trade-off.

The rupee featured in the remarks as well. Malhotra noted that the currency depreciated more than the average of previous years in 2025-26, and restated that exchange rate policy is unchanged: intervention is aimed at smoothing excessive and disruptive volatility rather than targeting any specific level or band.

The next scheduled MPC meeting is June 3 to 5. Minutes of the April meeting were to be published on April 22, which is where the substance of the discussion — including any dissent, of which there was none on the resolution — becomes available. For now the record is a unanimous hold with the risks named in public.