RBI holds repo rate at 5.25%, raises FY27 growth forecast

The Story in Brief

The RBI’s Monetary Policy Committee unanimously kept the repo rate at 5.25% on August 5 and retained its neutral stance, its fourth straight pause. It raised its FY27 growth forecast to 6.7% and lowered the inflation projection to 5%. Governor Sanjay Malhotra cited food and fuel prices, an uneven monsoon, El Niño, West Asia tensions and global trade uncertainty. Inflation is projected to peak at 5.9% in the third quarter. The Standing Deposit Facility rate stays at 5%, while the Marginal Standing Facility and Bank rates remain at 5.5%.

CFOs broadly welcomed the pause, saying domestic demand and investment remain resilient. V-Mart Retail reported a 39% rise in store footfalls in the first quarter of FY27, while Raymond Lifestyle saw weaker demand after cotton prices increased. Companies said planned capital expenditure remains on track, but warned that weak rains could hurt farm output and rural incomes. Elara Capital expects rates to remain unchanged through 2026, unless inflation becomes entrenched.