The Reserve Bank of India’s Monetary Policy Committee voted unanimously on Wednesday to hold the benchmark repo rate at 6.25%, while signalling that conditions for a rate cut in June are increasingly aligned if inflation continues to moderate.
RBI Governor Sanjay Malhotra, who took charge in December 2024, struck a distinctly dovish tone in his post-policy statement. He noted that headline CPI inflation has fallen to 4.1% in March 2026—comfortably within the central bank’s 2-6% tolerance band and approaching the 4% target for the first time in three years.
‘The committee remains vigilant but is increasingly confident that the disinflation trajectory is durable,’ Malhotra said, adding that food inflation, the primary driver of previous price surges, has cooled sharply thanks to a strong rabi harvest and improved supply chain logistics.
The MPC also revised its GDP growth projection upward to 7.4% for FY26, citing stronger-than-expected private investment and government capex execution. The central bank kept the Standing Deposit Facility rate at 6.0% and the Marginal Standing Facility rate at 6.5%.
Money markets reacted positively, with the 10-year government bond yield easing six basis points to 6.71%. Banking stocks rallied, with the Nifty Bank index rising 1.4% on hopes that cheaper credit will stimulate loan growth already running at 14% year-on-year.
Analysts at Goldman Sachs and Morgan Stanley both now forecast a 25 basis point cut at the June meeting, with a further 25bps reduction likely by December, taking the repo rate to 5.75% by year-end.
