{"id":71217,"date":"2026-04-10T20:13:28","date_gmt":"2026-04-10T14:43:28","guid":{"rendered":"https:\/\/www.nextias.com\/ca\/?p=71217"},"modified":"2026-04-10T20:22:56","modified_gmt":"2026-04-10T14:52:56","slug":"rbi-holds-repo-rate-at-5-25-per-cent","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/10-04-2026\/rbi-holds-repo-rate-at-5-25-per-cent","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 of the Reserve Bank of India decided to keep the repo rate unchanged at 5.25%.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>About<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>The Standing Deposit Facility (SDF)<\/strong> rate remains at <strong>5 per cent <\/strong>and the <strong>Marginal Standing Facility (MSF) rate<\/strong> and the <strong>bank rate at 5.5 per cent.<\/strong><\/li>\n\n\n\n<li><strong>The real GDP growth for 2026-27 <\/strong>is projected at 6.9%, with <strong>Q1 at 6.8%<\/strong>; Q2 at 6.7%; Q3 at 7.0%; and Q4 at 7.2%.<\/li>\n\n\n\n<li><strong>The inflation<\/strong> is projected for FY27 to be at 4.6 percent, with <strong>4.0 percent in Q1<\/strong>, 4.4 percent in Q2, 5.2 percent in Q3, and 4.7 percent in Q4.<\/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<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img data-dominant-color=\"fafbfb\" data-has-transparency=\"false\" style=\"--dominant-color: #fafbfb;\" loading=\"lazy\" decoding=\"async\" width=\"661\" height=\"479\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-66.png\" alt=\"\" class=\"not-transparent wp-image-71218\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-66.png 661w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/image-66-300x217.png 300w\" sizes=\"auto, (max-width: 661px) 100vw, 661px\" \/><\/figure>\n<\/div>\n\n\n<figure class=\"wp-block-table\"><table class=\"has-cyan-bluish-gray-background-color has-background\"><tbody><tr><td><strong>What is the Monetary Policy Committee (MPC)?<\/strong><br>&#8211; The MPC is a <strong>statutory body<\/strong> established under the <strong>RBI Act, 1934<\/strong> (amended in 2016).<br>&#8211; It is responsible for <strong>fixing the benchmark interest rate<\/strong> (repo rate) to maintain price stability while keeping growth in mind.<br>1. <strong>It consists of 6 members:<\/strong><br>(a). 3 from the RBI (including the Governor as Chairperson),<br>(b). 3 external members appointed by the Government.<br>&#8211; <strong>Functioning:<\/strong> It meets <strong>at least four times <\/strong>a year (usually bi-monthly) and the 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><br><strong>Flexible Inflation Targeting Framework (FITF)<\/strong><br>&#8211; India adopted a Flexible Inflation Targeting Framework (FITF) in <strong>2016.<\/strong> <br>&#8211; Under this, the government, in consultation with the RBI, <strong>sets an inflation target every five years.<\/strong>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%.<br><strong>Monetary Policy Tools in India<\/strong><br>Various instruments used by the RBI to control the money supply can be categorized into two categories:<br>&#8211; <strong>Quantitative Tool<\/strong>s \u2013 Quantitative tools of monetary policy are aimed at controlling the cost and quantity of credit.<br>&#8211; <strong>Qualitative Tools<\/strong> \u2013 Qualitative tools of monetary policy are aimed at controlling the use and direction of credit.<br><img data-dominant-color=\"d0c9bc\" data-has-transparency=\"false\" loading=\"lazy\" decoding=\"async\" width=\"350\" height=\"199\" class=\"not-transparent wp-image-71231\" style=\"--dominant-color: #d0c9bc; width: 350px;\" src=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/Screenshot-2026-04-10-at-8.14.02-PM.png\" alt=\"\" srcset=\"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/Screenshot-2026-04-10-at-8.14.02-PM.png 696w, https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2026\/04\/Screenshot-2026-04-10-at-8.14.02-PM-300x171.png 300w\" sizes=\"auto, (max-width: 350px) 100vw, 350px\" \/><br><br><strong>Quantitative Tools<\/strong><br>&#8211; <strong>Repo Rate:<\/strong> Rate at which RBI lends short-term funds to banks against collateral.<strong>Reverse Repo Rate<\/strong>: Rate at which RBI absorbs liquidity from banks.<br>&#8211; <strong>Cash Reserve Ratio (CRR)<\/strong>: Portion of deposits banks must keep with RBI in cash.<br>&#8211; <strong>Statutory Liquidity Ratio (SLR): <\/strong>Portion of deposits kept in liquid assets (gold, cash, securities).<br>&#8211; <strong>Open Market Operations (OMO): <\/strong>Buying\/selling of government securities to control liquidity.<br>&#8211; <strong>Marginal Standing Facility (MSF): <\/strong>Emergency borrowing by banks at a penal rate.<br>&#8211; <strong>Liquidity Adjustment Facility (LAF):<\/strong> Framework for repo\/reverse repo operations.<br>&#8211; <strong>Market Stabilisation Scheme (MSS): <\/strong>Bonds issued to absorb excess liquidity.<br><strong>Qualitative Tools<\/strong><br>&#8211; <strong>Margin Requirement: <\/strong>Controls loan-to-value ratio<br>&#8211; <strong>Consumer Credit Regulation: <\/strong>Regulates credit terms<br>&#8211; <strong>Rationing of Credit:<\/strong> Limits sectoral lending<strong>Moral Suasion: <\/strong>Persuasive guidance by RBI<br>&#8211; <strong>Direct Action: <\/strong>Penal action against non-compliant banks<\/td><\/tr><\/tbody><\/table><\/figure>\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>Geopolitical Uncertainty:<\/strong> The MPC decided to maintain the repo rate due to heightened geopolitical tensions in West Asia, which have worsened global economic uncertainty.<\/li>\n\n\n\n<li><strong>Supply-Side Shock:<\/strong> The MPC highlighted that the Indian economy is facing a supply-side shock, primarily due to <strong>disruptions in energy and commodity markets<\/strong>.<\/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>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:\/\/www.thehindu.com\/business\/Economy\/rbi-mpc-keeps-repo-rate-unchanged-april-8-2026\/article70837157.ece\" target=\"_blank\" rel=\"noopener\"><strong>TH<\/strong><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p><strong> Context <\/strong><\/p>\n<li class=\"ms-5\">The Monetary Policy Committee of the Reserve Bank of India decided to keep the repo rate unchanged at 5.25%.<\/li>\n<p><\/p>\n<p><strong>About<\/strong><\/p>\n<li class=\"ms-5\">The Standing Deposit Facility (SDF) rate remains at 5 per cent and the Marginal Standing Facility (MSF) rate and the bank rate at 5.5 per cent.<\/li>\n<li class=\"ms-5\">The real GDP growth for 2026-27 is projected at 6.9%, with Q1 at 6.8%; Q2 at 6.7%; Q3 at 7.0%; and Q4 at 7.2%.<\/li>\n<li class=\"ms-5\">The inflation is projected for FY27 to be at 4.6 percent, with 4.0 percent in Q1, 4.4 percent in Q2, 5.2 percent in Q3, and 4.7 percent in Q4.<\/li>\n<p><a href=\"https:\/\/www.nextias.com\/ca\/current-affairs\/10-04-2026\/rbi-holds-repo-rate-at-5-25-per-cent\" class=\"btn btn-primary btn-sm float-end\">Read More<\/a><\/p>\n","protected":false},"author":3,"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-71217","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\/71217","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=71217"}],"version-history":[{"count":6,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/71217\/revisions"}],"predecessor-version":[{"id":71243,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/71217\/revisions\/71243"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=71217"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=71217"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=71217"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}