{"id":66208,"date":"2026-02-07T17:58:26","date_gmt":"2026-02-07T12:28:26","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=66208"},"modified":"2026-02-07T18:02:09","modified_gmt":"2026-02-07T12:32:09","slug":"repo-rate-unchanged-rbi","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/07-02-2026\/repo-rate-unchanged-rbi","title":{"rendered":"RBI Holds Repo Rate at 5.25 per cent"},"content":{"rendered":"\n<p><strong>Syllabus: GS3\/ Economy<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Context<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at <strong>5.25%.<\/strong><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>More in News<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The MPC revised GDP growth for FY26 slightly higher to 7.4% (from 7.3%) and retail inflation to 2.1% (from 2%).\u00a0<\/li>\n\n\n\n<li>Inflation trends remain benign, with CPI inflation projected at 4\u20134.2% in Q1-Q2 FY27, slightly raised due to precious metal prices, while food price deflation continues to keep overall inflation low.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>What is the Repo Rate?<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The repo rate is the<strong> rate at which the RBI lends short-term money <\/strong>to commercial banks. <strong>It is the key policy tool <\/strong>used by the RBI to control liquidity, inflation, and economic growth.<\/li>\n\n\n\n<li><strong>A lower repo rate <\/strong>means banks can borrow from the RBI at cheaper rates. This encourages banks to lower lending rates, leading to:\n<ul class=\"wp-block-list\">\n<li>Easier access to credit for consumers and businesses<\/li>\n\n\n\n<li>Boost in investment, consumption, and economic activity<\/li>\n\n\n\n<li>Increased liquidity and money supply<\/li>\n\n\n\n<li>This can stimulate growth, especially during economic slowdowns<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<p><\/p>\n\n\n\n<div class=\"wp-block-group has-background\" style=\"background-color:#fff2cc\"><div class=\"wp-block-group__inner-container is-layout-constrained wp-block-group-is-layout-constrained\">\n<h3 class=\"wp-block-heading\"><strong>What is the Monetary Policy Committee (MPC)?<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The MPC is a <strong>statutory body<\/strong> established under the <strong>RBI Act, 1934<\/strong> (amended in 2016).<\/li>\n\n\n\n<li>It is responsible for <strong>fixing the benchmark interest rate<\/strong> (repo rate) to maintain price stability while keeping growth in mind.<\/li>\n\n\n\n<li><strong>It consists of 6 members:<\/strong>\n<ul class=\"wp-block-list\">\n<li>3 from the RBI (including the Governor as Chairperson),<\/li>\n\n\n\n<li>3 external members appointed by the Government.<\/li>\n<\/ul>\n<\/li>\n\n\n\n<li>Decisions are made by majority, and each member has one vote. In case of a tie, the<strong> RBI Governor has the casting vote.<\/strong><\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Flexible Inflation Targeting Framework (FITF)<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li>India adopted a Flexible Inflation Targeting Framework (FITF) in <strong>2016.<\/strong> Under this, the government, in consultation with the RBI, <strong>sets an inflation target every five years.<\/strong><\/li>\n\n\n\n<li>Under this framework, the Government sets the inflation <strong>target every five years <\/strong>in consultation with the RBI. The current mandate, effective until <strong>March 31, 2026,<\/strong> specifies a CPI inflation target of <strong>4%<\/strong>, with a tolerance band of <strong>\u00b12%<\/strong>, i.e. between 2% and 6%.<\/li>\n<\/ul>\n<\/div><\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Reasons Behind the recent Policy Decision<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Resilient Growth Momentum:<\/strong> Real GDP growth remains robust, supported by strong domestic consumption, income tax relief and GST rationalisation, and fiscal measures in the Union Budget.<\/li>\n\n\n\n<li><strong>External Sector Uncertainties: <\/strong>Rising geopolitical tensions, volatile crude oil prices, and divergence in global monetary policies pose risks to capital flows and exchange rate stability. A pause helps safeguard macroeconomic stability.<\/li>\n\n\n\n<li><strong>Inflation Within the Target Range:<\/strong> Retail inflation remains within the <strong>2\u20136% target band<\/strong>, and core inflation is contained limiting the need for immediate policy action.<\/li>\n\n\n\n<li><strong>Impact of Trade Agreements: <\/strong>India recently signed trade agreements with the United States, the European Union, Oman and New Zealand.\n<ul class=\"wp-block-list\">\n<li>These agreements are expected to boost exports and investments, reduce external vulnerabilities, and support medium-term growth.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Impact on the Indian Economy<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Impact on Borrowers and Households:<\/strong> Stable interest rates reduce financial uncertainty for middle-class households and housing loan borrowers.<\/li>\n\n\n\n<li><strong>Impact on Investment and Credit Growth:<\/strong> Stable interest rates, strong demand conditions, and trade agreements create a predictable environment for private investment.<\/li>\n\n\n\n<li><strong>Macroeconomic Stability: <\/strong>The decision reinforces the credibility of India\u2019s Flexible Inflation Targeting framework and demonstrates institutional stability in monetary policymaking.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Way Ahead<\/strong><\/h3>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Monetary Transmission:<\/strong> Efficient transmission of past rate cuts through the banking system must be ensured so that credit flows effectively to productive sectors.<\/li>\n\n\n\n<li><strong>Safeguard External Sector Stability:<\/strong> Active liquidity management, prudent forex reserve deployment, and monitoring of global financial conditions are necessary to cushion against external shocks.<\/li>\n\n\n\n<li><strong>Enhance Fiscal-Monetary Coordination:<\/strong> Continued fiscal consolidation alongside targeted public spending will complement monetary policy and sustain long-term growth without triggering inflationary pressures.<\/li>\n<\/ul>\n\n\n\n<p><strong>Source: <\/strong><a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/rbi-holds-interest-rates-steady-what-drove-the-decision-10516663\/\" target=\"_blank\" rel=\"noopener\"><strong>IE<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\"> The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25%. <\/li>\n<p><\/p>\n<p><strong> More in News <\/strong><\/p>\n<li class=\"ms-5\"> The MPC revised GDP growth for FY26 slightly higher to 7.4% (from 7.3%) and retail inflation to 2.1% (from 2%). <\/li>\n<li class=\"ms-5\"> Inflation trends remain benign, with CPI inflation projected at 4\u20134.2% in Q1-Q2 FY27, slightly raised due to precious metal prices, while food price deflation continues to keep overall inflation low. <\/li>\n<p><a href=\" https:\/\/www.nextias.com\/ca\/current-affairs\/07-02-2026\/repo-rate-unchanged-rbi \" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[],"class_list":["post-66208","post","type-post","status-publish","format-standard","hentry","category-current-affairs"],"acf":[],"jetpack_featured_media_url":"","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66208","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=66208"}],"version-history":[{"count":4,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66208\/revisions"}],"predecessor-version":[{"id":66227,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/66208\/revisions\/66227"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=66208"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=66208"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=66208"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}