RBI Repo Rate at 5.25%: FY27 Hold, 6.9% Growth

India Ratings sees no rate change through FY27

India Ratings and Research expects the Reserve Bank of India (RBI) to keep the policy repo rate unchanged at 5.25% through the rest of FY27. The agency’s view rests on inflation staying within the RBI’s tolerance band, even with the expected pass-through of higher fuel prices. It said it does not expect the RBI to either increase or reduce the repo rate in the remainder of the fiscal year. The repo rate assumption matters for borrowers and investors because it shapes funding costs across the banking system. It also signals how the central bank is balancing inflation risks against growth conditions. The projection comes at a time when global headlines, including geopolitical uncertainty and oil price volatility, remain a key watchpoint.

RBI’s MPC holds rate, keeps stance neutral

The RBI’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, has also maintained the repo rate at 5.25%. The decision was unanimous in the first meeting of FY27, held between April 6 and April 8. The policy stance was retained at ‘neutral’, indicating the central bank wants flexibility as data evolves. Along with the repo rate, the MPC indicated other operating rates were unchanged: the standing facility rate at 5%, and the MSF rate and the bank rate at 5.5%. This was described as a continuation of the central bank’s cautious approach amid shifting inflation and growth risks.

What India Ratings said about inflation risks

India Ratings said it expects the RBI to hold rates because inflation is projected to stay below the 6% ceiling of the tolerance band, even if consumer prices show an upward trajectory. The agency linked its “status quo” call to the view that CPI will remain within the RBI’s tolerance range of less than 6%. Its assessment explicitly flags the pass-through from higher fuel prices as a factor that could push inflation up, but not enough to force a rate move under its base case. The forecast underscores how the policy debate is less about immediate rate cuts and more about whether new shocks could compel tightening.

FY27 growth projection: 6.9%, with a quarterly path

The RBI has projected real GDP growth at 6.9% for FY27. It also provided a quarterly profile: 6.8% in Q1, 6.7% in Q2, 7.0% in Q3 and 7.2% in Q4. In the policy communication cited, the growth outlook was described as weaker than FY26, while inflation was described as firmer than earlier expectations. Separately, the RBI noted that the economy is estimated to have grown by 7.6% in FY26. Taken together, the numbers frame FY27 as a year of steady but slightly moderated expansion, even as the inflation trajectory remains an active risk variable.

FY27 inflation projection: 4.6% headline CPI

On inflation, the RBI projected CPI inflation at 4.6% for FY27. The quarterly breakdown was given as 4.0% in Q1, 4.4% in Q2, 5.2% in Q3 and 4.7% in Q4. One report also noted core inflation is likely to come in at 4.4%. The quarterly pattern suggests a more pronounced rise in the middle of the year before moderating. Importantly, the full-year estimate remains below 6%, aligning with India Ratings’ argument that the tolerance band provides room to keep policy rates steady.

Why fuel prices and geopolitics remain central to the outlook

Multiple references in the reports highlight geopolitical risk, particularly around West Asia, as a channel for oil price shocks. One account noted that a two-week ceasefire brought some relief and cooled crude oil prices, which also supported the rupee. Even with such short-term respite, the concern remains that higher fuel costs can feed into broader inflation through transport and input costs. India Ratings explicitly mentioned the expected pass-through of higher fuel prices. This is one reason the policy stance is being maintained as neutral, rather than shifting decisively toward easing.

Rate-cycle context: the 2025 cuts and the February 2026 pause

The latest hold at 5.25% follows a period of easing and then caution. In the February 2026 meeting, the MPC kept the repo rate steady at 5.25% after a cumulative 125-basis-point cut in 2025. Reports described the approach as ‘wait-and-watch’ with an emphasis on stability. Another report noted that the latest decision marked the fourth consecutive pause in the current interest rate cycle. This context is relevant because it shows policy has already adjusted meaningfully, and the current phase is about assessing how prior cuts transmit into the economy without letting inflation risks build.

What economists and polls expected ahead of the decision

Ahead of the April policy, a Business Standard poll of economists from 10 financial institutions expected the MPC to maintain the repo rate at 5.25% despite the West Asia conflict and higher international oil prices. CareEdge Ratings’ Chief Economist Rajani Sinha said the RBI was likely to maintain ‘status quo’ on policy rates and stance, citing a volatile global environment and a wait-and-watch strategy. Muthoot FinCorp’s Chief Economist Apoorva Javadekar also said the RBI was likely to hold the repo rate at 5.25%, pointing to external headwinds and low inflation at the start of the oil price shock, citing 3.21% inflation in February 2026. Former State Bank of India Chairman Dinesh Khara was also cited as saying the RBI would hold the repo rate steady.

Key numbers at a glance

Market impact: what a prolonged hold implies

A steady repo rate typically keeps lending and deposit rate adjustments gradual, which can influence consumer loans, home loans, and corporate borrowing costs. For banks, a prolonged pause can stabilise near-term funding assumptions, even if competition for deposits continues. For bond markets, stable policy rates tend to anchor expectations, though inflation surprises and oil moves can still drive yields. The RBI’s published quarterly inflation path, particularly the Q3 projection of 5.2%, is likely to remain a key input for market pricing and risk management. The neutral stance also signals that future moves will be data-dependent, not pre-committed.

Why this matters: the link between tolerance-band inflation and policy stability

India Ratings’ core argument is straightforward: if CPI remains below 6%, the RBI has room to keep rates unchanged even as fuel price pass-through plays out. The RBI’s own FY27 CPI forecast of 4.6% is consistent with that framework. At the same time, the RBI’s growth projection of 6.9% provides a macro backdrop where policymakers may prefer stability rather than frequent shifts. The combination of a neutral stance, a mid-year inflation pickup, and elevated geopolitical uncertainty explains why the debate is centred on holding policy steady.

Conclusion

India Ratings and Research expects the RBI to keep the repo rate at 5.25% through FY27, citing inflation that should remain within the RBI’s tolerance band despite fuel-price pass-through risks. The RBI’s MPC has already maintained the repo rate at 5.25% with a neutral stance, alongside FY27 projections of 6.9% growth and 4.6% inflation. The next key signals for markets will come from incoming inflation prints, crude-linked price pressures, and how growth tracks the RBI’s quarterly path.