Here's why RBI kept repo rate unchanged at 5.25% in February MPC meet
New Delhi, Feb 6, 2026
The governor cited strong growth and lower-than-expected inflation as the key reasons for keeping the repo rate unchanged in the February policy meet
Reserve Bank of India's (RBI's) Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, on Friday unanimously kept the repo rate unchanged at 5.25 per cent, while maintaining the stance as 'neutral'.
In the December 2025 meeting, the repo rate was reduced by 25 basis points, bringing it down to 5.25 per cent from 5.5 per cent. The governor cited strong growth and lower-than-expected inflation as the key reasons for keeping the repo rate unchanged in the February policy meet.
Here's a look at why the RBI did not change the repo rate in February:
1. Growth remains strong
Malhotra said that the Indian economy continues to show strength. The real gross domestic product (GDP) is poised to register significantly higher growth of 7.4 per cent in 2025-26, as compared to the previous year, he said.
Early estimates suggest growth is holding up well, supported mainly by domestic demand, even as the global environment remains difficult. Malhotra said, "Agricultural activity will be supported by healthy reservoir levels, robust rabi sowing, and improvement in crop vegetation conditions. Improving corporate sector performance and sustained momentum in the informal sector should boost manufacturing activity. Construction sector growth is expected to remain firm."
2. Inflation below expectation
Inflation stayed below the RBI’s comfort limit in November and December. Inflation is also expected to remain under control in the first half of 2026-27. Malhotra credited the small rise in inflation estimates in the February meeting to higher prices of precious metals.
"After reviewing all economic indicators, the MPC felt that the current repo rate is suitable and decided to keep it unchanged. The policy stance was also kept neutral, although one member suggested moving towards a more growth-supportive approach. The RBI said future decisions will depend on how economic data evolves," Malhotra said.
3. Trade deals to support growth
Even amid geopolitical headwinds, the RBI noted that the recent trade deal signed between India and the European Union (EU) and the deal announced with the US are likely to support growth. "Signing of a landmark trade deal with the EU and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period," said Malhotra.
"The MPC noted that since the last policy meeting, external headwinds have intensified, though the successful completion of trade deals augurs well for the economic outlook," he added.
India inked a trade deal with the EU last month, which is being referred to as the "mother of all deals". It is set to strengthen economic and political ties between the world's second and fourth largest economies at a time of rising geopolitical tensions and global economic challenges.
On February 2, US President Donald Trump also announced that India and the US have reached a trade agreement, which will potentially bring down the tariffs on Indian imports to 18 per cent from the existing 25 per cent.
The next MPC meeting is scheduled to take place between April 6 and 8.
[The Business Standard]
