MPC Keeps the Repo Rate Unchanged
On 6th August 2025, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), has announced its Monetary Policy Statement. MPC has opted to maintain the interest rate. Let us see the MPC statement in detail now.
MPC Keeps the Repo Rate Unchanged – Monetary Policy Statement, August 2025
MPC unanimously maintained the key policy rate (i.e. repo rate) and kept it unchanged at 5.50%.
As a result, the Standing Deposit Facility (SDF) rate shall stand adjusted at 5.25%, while the Bank Rate and Marginal Standing Facility remain at 5.75%.
The decision aligns with reaching a medium-term CPI inflation target of 4% with a band of +/- 2%, all while also promoting growth.
The MPC maintains its neutral policy stance.
MPC on Gross Domestic Product (GDP) Estimates
Global economic conditions remain challenging, with ongoing trade negotiation challenges and geopolitical uncertainties. Despite some improvement in financial market volatility, global growth remains subdued.
Domestically, growth is resilient, driven by private consumption, rural demand, and government capex. The southwest monsoon is supporting agriculture, while the services sector and construction activity remain strong. However, industrial growth is uneven, with the electricity and mining sectors lagging.
The economy remains resilient. Thanks to strong monsoon, low inflation, and supportive policies, which support the domestic economic activities by boosting demand. The services sector is expected to remain strong, but external demand is uncertain due to ongoing trade negotiations.
Geopolitical tensions and global uncertainties pose risks to the growth outlook.
The projected real GDP growth for 2025-26 is 6.5%, with quarterly growth rates ranging from 6.3% to 6.7%. For Q1:2026-27, the projected growth is 6.6%. Overall, the risks to the growth outlook are considered to be evenly balanced.
MPC on Inflation
In June 2025, CPI headline inflation declined to a 77-month low of 2.1 % due to a sharp decline in food inflation. Core inflation increased to 4.4 %, driven partly by rising gold prices.
The inflation outlook for 2025-26 is more favourable than expected, with CPI likely to edge up above 4 % by Q4. Weather-related shocks pose risks to the inflation outlook, but overall CPI inflation for 2025-26 is projected at 3.1 % with Q2 at 2.1 %, Q3 at 3.1 %, and Q4 at 4.4 %. CPI inflation for Q1:2026-27 is projected at 4.9 %..
The MPC decided to keep the repo rate unchanged. The risks are considered to be evenly balanced.
MPC Stance
As headline inflation is lower than expected due to volatile food prices, while core inflation remains steady. Growth is robust but below expectations, and uncertainties regarding tariffs persist. Monetary policy transmission is ongoing, and the impact of rate cuts is still unfolding.
The current macroeconomic conditions call for keeping the policy repo rate at 5.5%, with the MPC unanimously voting to maintain it. They will continue to monitor data and adjust policy as needed, with all members agreeing to maintain a neutral stance.
Additional Measures
The importance of the interest and welfare of the citizens of India for the RBI.
Three consumer-centric announcements are made:
- Banks will be organizing camps for re-KYC for Jan-dhan Scheme accounts, focusing on financial inclusion and customer grievance redress.
- Standardising the procedure for settlement of claims in respect of bank accounts and articles kept in safe custody of deceased bank customers to make settlement more convenient and simpler.
- The RBI Retail-Direct platform is being expanded to allow retail investors to invest in treasury bills through systematic investment plans.
My Perspective and Takeaways
From the MPC statements, it is clear that keeping inflation under control remains the main aim of the RBI. The present policy stance and keeping the repo rate unchanged are expected, as the RBI has implemented the frontloading policies on the rate cut this year.
