RBI MPC: Malhotra flags FY26 growth 7.4%, CPI 2.1%

Growth confidence, inflation comfort, liquidity focus

RBI Governor Sanjay Malhotra used his MPC address to project confidence in India’s growth momentum while flagging an evolving inflation path and the need for proactive liquidity management. The messaging combined macro guidance with a long list of regulatory and consumer protection measures. At the centre of the address was the policy rate decision, with the MPC keeping the repo rate unchanged at 5.25% in one communication and reiterating that the stance remains neutral and data-dependent. Malhotra said the economy is “in a good spot” even as global uncertainties remain elevated. He also stressed that RBI’s operating priority is to keep system liquidity adequate so monetary transmission stays smooth. For markets, the package mattered because it linked forecasts, transmission metrics and regulatory actions in one frame.

Repo rate decision and the MPC’s neutral stance

On rates, Malhotra said the Monetary Policy Committee was comfortable maintaining the status quo and described the current policy rate as appropriate for prevailing macroeconomic conditions. He reiterated that the stance remains neutral, and that future actions will be guided by incoming data rather than fixed forward guidance. The decision-making approach was also reflected in other policy communications included in the text. In October, the MPC kept the repo rate unchanged at 5.5% with a neutral stance, a move described as widely expected by markets and economists. Another policy narrative in the material referenced a 25 bps cut to 6% and a shift from neutral to accommodative, signalling additional support if needed. Separately, the February 7 decision cited in the text cut the repo rate by 25 bps to 6.25% after eleven straight meetings of no change.

FY26 growth revised higher in the February address

In the February MPC address, Malhotra said real GDP growth for FY26 has been revised upward to 7.4%. He added that real gross value added growth is estimated at 7.3%, led largely by services, while manufacturing activity is showing signs of revival. Urban consumption, he said, is also expected to strengthen further. The broader narrative was that underlying data continues to point to strong momentum and that growth looks “durable”. In another portion of the provided material, RBI revised full-year GDP growth forecast to 7.3% from 6.8% earlier, linked to a December 3 to 5 MPC meeting backdrop. And in the October policy review section, the RBI raised its GDP growth forecast for FY26 to 6.8% from 6.5% earlier, while also providing a quarterly profile for Q2, Q3 and Q4.

Inflation path: softer prints, but watch the glide back to target

On inflation in the February address, Malhotra said headline CPI is projected at 2.1 for FY26, with inflation expected to normalise in the first half of FY27. He said CPI is seen at 4.0 in Q1 FY27 and 4.2 in Q2 FY27, and noted that core inflation excluding precious metals is expected to remain range-bound. The October policy segment cut the RBI’s CPI inflation forecast for FY26 to 2.6% from 3.1% earlier, citing GST rate cuts, benign food prices and adequate foodgrain stocks. The text also notes the MPC’s observation that headline inflation turned more benign, with food inflation easing to its lowest since 2019. Across the separate “minutes” based narrative, inflation was described as near the 4% target, with projections giving greater confidence in durable alignment to the target over a 12-month horizon. Malhotra also reiterated RBI’s mandate to keep CPI inflation at 4% with a tolerance band of plus or minus 2%.

Liquidity and transmission: keeping overnight rates aligned

Liquidity management featured prominently in Malhotra’s remarks. He said RBI’s responsibility is to ensure sufficient system liquidity to meet the productive needs of the economy and to support smoother transmission. In the February address, Malhotra described transmission as “excellent”, stating that against cumulative rate cuts of 125 basis points, bank lending rates have fallen by over 100 basis points. He added RBI will provide liquidity pre-emptively using tools such as variable rate repos and open market operations, with the immediate objective of keeping overnight rates aligned with the repo rate. In the October policy section, system liquidity averaged a daily surplus of Rs 2.1 lakh crore since the August policy, and the drawdown of government balances plus the remaining 75 bps CRR cut were expected to ease liquidity further in October to November. The October transmission metrics also said fresh loan rates of scheduled banks fell by 58 bps since February, while fresh deposit rates were down by 106 bps.

Consumer protection: compensation for small-value digital fraud

Malhotra announced the RBI will introduce a framework to compensate customers up to ₹25,000 for losses arising from small-value digital frauds. He said a discussion paper will also be issued to strengthen digital payment safety, including possible additional authentication measures for select users. In another part of the material, RBI also flagged steps to enhance consumer protection through an expanded Ombudsman scheme and digital banking access for basic accounts. While the text does not provide timelines for the compensation framework, it clearly positions consumer protection as a policy priority alongside rate and liquidity management. For payment ecosystems and banks, these measures can influence operational controls and dispute handling. For consumers, the announcement is directly relevant to confidence in digital payments.

Credit and inclusion: MSME collateral-free limit, KCC and Lead Bank portal

On credit and inclusion, Malhotra said RBI proposes to raise the collateral-free loan limit for MSMEs to ₹20 lakh. He also announced fresh guidelines for Kisan Credit Cards and a unified reporting portal for the Lead Bank Scheme to improve coordination and monitoring. The measures sit alongside broader discussions on credit partnerships in other policy narratives included in the text. One policy segment stated RBI would expand the co-lending framework beyond priority sector lending to all regulated entities and all loans. Another included changes around UPI transaction limits, where RBI would allow NPCI greater flexibility in setting limits for person-to-merchant UPI transactions, while keeping the current person-to-person limit of Rs 1 lakh unchanged.

Regulatory measures: NBFC exemptions, VRR cap removal, ECB rules

On regulatory easing, Malhotra said certain NBFCs with no public funds and no customer interface may be exempted from registration requirements. He also announced the removal of the ₹2.5 lakh crore cap under the Voluntary Retention Route, and said revised external commercial borrowing regulations have been finalised and will be notified shortly. Separately, the October policy review narrative said RBI announced 22 regulatory steps, including implementing the Expected Credit Loss framework and revised Basel III norms from April 2027 with a glide path till 2031. That segment also mentioned enabling banks to finance corporate acquisitions and expand lending against shares and IPO financing, easing infrastructure financing norms for NBFCs, and considering new licences for urban co-operative banks. Another policy narrative added proposals for a market-driven mechanism for securitisation of stressed assets in addition to the ARC route.

External sector signals: rupee watch, flows and reserves

In the October policy review segment, Malhotra said RBI is closely monitoring rupee movements amid volatility and phases of depreciation. The text reported net FDI inflows hit a 38-month high in July, even as FPIs recorded outflows of USD 3.9 billion so far in FY26. Forex reserves were reported at USD 700.2 billion, covering more than 11 months of imports. Malhotra also warned that higher US tariffs of up to 50% on Indian exports are likely to slow external demand, even as domestic momentum remained resilient. In another speech excerpt, he said “higher tariffs shall have a negative impact on net exports,” and that trade frictions will stifle global growth.

Key numbers at a glance

Market impact: what investors and borrowers can take away

The clearest market signal across the material is the RBI’s emphasis on transmission, liquidity alignment and a cautious, data-led stance. Malhotra repeatedly tied liquidity operations to the goal of keeping overnight rates aligned to the repo rate, which matters for money market conditions and short-end rate expectations. The combination of softer inflation forecasts and upward or resilient growth projections can influence bond yields and rate-sensitive sectors, but the text keeps the MPC’s approach explicitly conditional on evolving inflation durability and external stability. The announced regulatory steps, including work on Expected Credit Loss, Basel III glide paths, and frameworks around stressed assets, co-lending and gold loan norms, can affect bank and NBFC compliance plans. On the consumer side, the proposed digital fraud compensation framework and strengthened digital safety measures may raise operational standards for payment intermediaries.

Conclusion: a policy package built around stability and transmission

Across the different policy communications provided, Malhotra’s messaging combines confidence in domestic momentum with caution on global risks such as trade tensions, geopolitical flashpoints and volatile commodity prices. The MPC’s rate decisions and stance references vary across meetings described in the text, but the underlying themes remain consistent: inflation alignment to target, support for growth, and active liquidity management. The measures on digital fraud compensation, MSME collateral-free lending limits, and regulatory simplification for select NBFCs add a strong operational policy layer beyond the repo decision. The next set of market cues will come from notified regulations, discussion papers on digital safety, and subsequent MPC guidance on inflation durability and external stability.