Mumbai, Feb 6 (NationPress) RBI Governor Sanjay Malhotra revealed on Friday that the monetary policy committee has come to a unanimous decision to maintain the policy repo rate at the existing level of 5.25 percent and continue with a neutral monetary policy stance.

Governor Malhotra emphasized that this decision was made after thorough evaluation of the current macroeconomic landscape and future economic projections.

He noted that since the previous monetary policy meeting in December, global challenges have escalated, yet the trade agreements established by the government are promising for future economic growth.

Malhotra reiterated that the RBI would uphold a neutral policy stance.

This neutral stance aims to neither stimulate nor restrict liquidity, achieving a delicate balance between managing inflation and supporting growth. The RBI has maintained this stance as it awaited the impact of prior monetary policy easing and the development of trade-related consequences.

According to Malhotra, inflation remains under control and is currently below the RBI's tolerance threshold. The inflation outlook is favorable, with the RBI adjusting its projection for CPI inflation for Q1 and Q2 of 2026-27 to 4 percent and 4.2 percent, respectively. The slight increase in projections is attributed to anticipated rises in precious metal prices; however, underlying inflation is expected to remain within acceptable limits.

The RBI Governor also stated that the growth outlook for the Indian economy appears positive, expected to be driven by domestic factors.

During the last monetary policy committee meeting, the repo rate was reduced by 25 basis points to 5.25 percent from 5.5 percent in December to encourage economic growth.

In the reviews conducted in August and October, the monetary policy committee, led by the RBI Governor, decided to keep the repo rate unchanged to control inflation.

Prior to that, the RBI decreased the repo rate by 100 bps from 6.5 percent to 5.5 percent in quick succession between February and June, with its effects still being felt in the economy.

A lower policy rate accompanied by increased liquidity in banks contributes to a reduction in interest rates for bank loans, facilitating easier borrowing for both consumers and businesses. This, in turn, leads to increased consumption and investment, driving economic growth.

However, the effectiveness of these rate cuts depends significantly on how swiftly and effectively commercial banks convey these benefits to borrowers.