The Reserve Bank of India on Friday kept the benchmark repo rate unchanged at 5.25 per cent for the second consecutive policy review, as policymakers weighed inflation risks arising from the West Asia conflict and rising crude oil prices.
Announcing the second bi-monthly monetary policy of FY27, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) unanimously voted to maintain the key lending rate while retaining a neutral policy stance.
The decision comes against the backdrop of a three-month-long geopolitical crisis in West Asia that has disrupted energy supplies, pushed up crude prices, and heightened inflationary concerns for import-dependent economies such as India.
Despite retail inflation easing closer to the RBI’s medium-term target of 4 per cent, with headline Consumer Price Index (CPI)-based inflation cooling to 3.48 per cent in April, the central bank remains cautious over upside risks.
Concerns over a potentially weak monsoon, rising fuel prices and supply disruptions are expected to add pressure on inflation in the coming months.
The RBI is also monitoring the rupee’s continued depreciation. The Indian currency touched a record closing low of 96.86 against the US dollar on May 20, 2026, amid persistent pressure from elevated oil prices, capital outflows, widening trade deficits and a stronger dollar.
The rupee has weakened nearly 7 per cent so far this year and has fallen around 6 per cent since the escalation of the Iran conflict in late February.
The central bank had cut the repo rate by 25 basis points each in February, April and December 2025, followed by a sharper 50-basis-point reduction in June, as inflation softened significantly.
India’s retail inflation had fallen to a historic low of 0.25 per cent in October 2025,the lowest since the current CPI series began.
(With inputs from PTI)
