RBI MPC August 2026: Repo Rate Held at 5.25% as Inflation and Global Risks Remain in Focus 

The Reserve Bank of India (RBI) has kept the policy repo rate unchanged at 5.25% following the Monetary Policy Committee’s (MPC) meeting held from August 3 to 5, 2026. The decision was unanimous, with the MPC also retaining its neutral policy stance. 

The latest decision comes against a backdrop of resilient domestic economic activity, while global uncertainty, elevated energy prices, food inflation and geopolitical developments continue to influence the economic outlook. 

RBI keeps repo rate unchanged at 5.25% 

The MPC has maintained the repo rate at 5.25%. As a result, the Standing Deposit Facility (SDF) rate remains at 5.00%, while the Marginal Standing Facility (MSF) rate and Bank Rate remain at 5.50%. 

The RBI has retained its neutral stance, allowing it to respond to evolving economic conditions as more clarity emerges on the trajectory of inflation and growth. 

The decision follows a period in which inflation had remained below the RBI’s target for 16 consecutive months before rising to 4.4% in June 2026. The RBI noted that the increase was primarily driven by higher food and fuel inflation, while core inflation remained moderate. 

Why has the RBI kept the repo rate unchanged? 

The RBI’s decision reflects a balance between resilient economic growth and emerging inflation risks. 

India’s domestic economy continues to show strength. Private consumption has remained robust, while investment activity continues to be supported by construction, capital goods and bank credit. Services exports have also remained healthy, alongside a rebound in merchandise exports. 

At the same time, the global economic environment remains uncertain. Geopolitical tensions, volatile oil prices, supply chain pressures and changing global monetary policy expectations continue to pose risks. 

The RBI also highlighted risks from an uneven southwest monsoon and El Niño conditions, which could affect agriculture and rural demand. 

With inflation expected to rise further in the near term, the MPC indicated that it wants greater clarity on the inflation outlook before taking further policy action. 

RBI lowers FY2026-27 growth projection to 6.7% 

The RBI expects the Indian economy to remain resilient despite global headwinds. 

Real GDP growth for 2026-27 has been projected at 6.7%, with quarterly growth projected at 7.0% in Q1, 6.4% in Q2, 6.5% in Q3 and 6.8% in Q4. 

The central bank expects domestic demand to remain an important support for growth. Sustained services activity, stable employment conditions, GST rationalisation, robust credit flows and continued government spending on infrastructure are expected to support economic activity. 

However, the RBI has flagged global trade conditions, geopolitical developments, monsoon patterns and energy prices as key factors that could influence the outlook. 

Inflation expected to rise before moderating 

CPI inflation increased to 4.4% in June 2026, primarily due to higher food and fuel prices. 

The RBI expects inflation to rise further in the near term and peak in Q3 of FY2026-27 before moderating. CPI inflation for the full financial year is projected at 5.0%, with inflation expected at 4.7% in Q2, 5.9% in Q3 and 5.5% in Q4. 

Importantly, the RBI noted that underlying inflation pressures remain relatively contained. Core inflation stood at 3.9% during May and June, while core inflation excluding precious metals was lower at 2.3% to 2.5%. 

This distinction is important because the current increase in headline inflation is largely being driven by food and fuel rather than broad-based demand pressures. 

What does the unchanged repo rate mean for borrowers? 

For borrowers, the immediate takeaway is that there is no new change in the RBI’s policy rate following the August MPC meeting. 

The repo rate remains at 5.25%, meaning borrowers should not expect a policy-rate-driven change in their borrowing costs solely as a result of this MPC decision. The actual impact on individual loan rates can vary depending on the lender, loan type, benchmark and other applicable terms. 

For households considering a loan, the broader economic environment remains important. A stable policy rate, resilient economic activity and the RBI’s continued focus on inflation indicate that borrowers should continue to evaluate loans carefully, looking beyond the headline interest rate and considering affordability, repayment capacity and the overall cost of borrowing. 

What should borrowers watch going forward? 

The RBI’s next policy decisions will depend on how inflation and growth evolve over the coming months. 

Food and fuel prices, the monsoon, global oil prices, geopolitical developments and global trade conditions will remain important factors to watch. At the same time, domestic consumption, investment and credit growth will provide signals on the strength of economic activity. 

For consumers, understanding these broader trends can help put changes in borrowing costs and household finances into perspective. 

The road ahead 

The August MPC decision reflects the RBI’s cautious approach at a time when India’s domestic economy remains resilient but the inflation outlook has become more uncertain. 

By keeping the repo rate unchanged at 5.25% and retaining a neutral stance, the MPC has chosen to wait for greater clarity on the evolving growth-inflation balance before making its next policy move. 

For borrowers and households, the key message is to stay informed, assess borrowing decisions carefully and keep an eye on how inflation, interest rates and the wider economy evolve in the months ahead.