NE BUSINESS BUREAU
MUMBAI, OCT 1
The Reserve Bank of India (RBI) on Wednesday kept its policy interest rate unchanged at 5.5 per cent for the second consecutive time, even as it upgraded the GDP growth forecast for FY2026 to 6.8 per cent from 6.5 per cent.
Announcing the fourth bi-monthly monetary policy of the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously decided to retain the repo rate at 5.5 per cent with a neutral stance.
Malhotra noted that while inflation has moderated significantly due to easing food prices and GST rate rationalisation, tariff-related headwinds could slow growth in the second half of the year. “Growth continues to be below our aspirations. The outlook for Q3 and beyond remains modest, but the upward revision for FY2026 reflects resilience in domestic demand,” he said.
Inflation under control, but uncertainties ahead
Retail inflation has been trending below the 4 per cent target since February, touching a six-year low of 2.07 per cent in August. Since February 2025, the RBI has cut policy rates by a cumulative 100 basis points—25 bps each in February and April, followed by a 50 bps cut in June—before pausing at the current level.
Malhotra highlighted that the MPC will “wait and watch” how government policies and tariff adjustments play out before taking further steps.
22 reform measures unveiled
Alongside the policy statement, Governor Malhotra announced 22 measures aimed at strengthening banks, easing credit, simplifying regulations, and boosting the rupee’s international role. Key highlights include:
- Lower capital requirements for home and small business loans, making credit cheaper.
- Higher borrowing limits: Individuals can now borrow up to ₹1 crore against shares (earlier ₹20 lakh) and up to ₹25 lakh for IPO financing (from ₹10 lakh).
- Simpler banking rules: Nearly 9,000 guidelines to be consolidated into thematic regulations.
- Forex flexibility: Exporters in IFSC can now hold foreign currency balances for 3 months instead of 1. Merchanting trade timelines extended to 6 months.
- Improved consumer protection: Zero-balance savings accounts to offer free digital banking; stronger RBI Ombudsman with inclusion of rural cooperative banks.
- Rupee internationalisation: Indian banks can now lend INR to Bhutan, Nepal, and Sri Lanka for cross-border trade, while special rupee accounts may invest in corporate bonds.
“These reforms are designed to improve banking efficiency, promote ease of doing business, expand credit access, and strengthen the global role of the Indian Rupee,” Malhotra said.
Outlook
With the repo rate stable and GDP growth outlook revised upward, the RBI is signalling confidence in India’s economic fundamentals while exercising caution on inflationary and trade-related risks. The next policy review will provide clarity on whether rate adjustments are back on the table, depending on global and domestic developments.
