Fri Feb 06 05:00:00 UTC 2026: ### RBI Holds Steady at 5.25% as Trade Deals Bolster Outlook
The Story:
The Reserve Bank of India (RBI) Governor, Sanjay Malhotra, announced on February 6, 2026, that the central bank’s policy rate would remain unchanged at 5.25%. This decision, reached unanimously by the Monetary Policy Committee (MPC) following a detailed assessment of macroeconomic conditions, comes after Finance Minister Nirmala Sitharaman’s Budget announcement for financial year 2026-27. While acknowledging intensified external headwinds, Governor Malhotra highlighted the positive impact of recently concluded trade deals and a resilient domestic economy.
The RBI projects a positive outlook for both domestic inflation and economic growth, revising real GDP growth upwards for the next two quarters and forecasting CPI inflation for 2025-26 at 2.1%. Accompanying the announcement were proposals focused on improving data management, easing branch opening norms for NBFCs, and allowing banks to lend to REITs with safeguards.
Key Points:
- RBI policy rate remains unchanged at 5.25%.
- Decision made by the MPC on February 6, 2026.
- Neutral stance maintained after assessing macroeconomic conditions.
- Real GDP growth for the next two quarters revised upwards.
- CPI inflation for 2025-26 projected at 2.1%.
- Forex reserves healthy at $723.8 billion by the end of January.
- Successful trade deals are expected to support growth.
Critical Analysis:
The decision to hold rates steady, even after a 25 bps reduction in December 2025, suggests a cautious approach by the RBI. The historical context shows that the US and EU trade deals are a key factor in this decision, implying that these deals are expected to be significant economic drivers. The RBI is likely balancing the need to support growth with the need to manage inflation amidst global economic uncertainty.
Key Takeaways:
- The RBI prioritizes stability and growth in the face of global challenges.
- Trade deals with the US and EU are now major factors influencing RBI policy.
- Inflation remains a key concern, despite positive projections.
- Liquidity management remains a proactive focus for the RBI.
- A neutral stance indicates a wait-and-see approach, dependent on the actual impact of trade deals.
Impact Analysis:
The steady rate is likely to reassure investors and maintain confidence in the Indian economy. The focus on liquidity management and supporting specific sectors like REITs suggests targeted efforts to stimulate economic activity. The successful navigation of external headwinds, as perceived by the RBI, could further enhance India’s standing as a stable and attractive investment destination in the long term. The success of the new trade deals will be closely monitored, as they appear pivotal to future monetary policy decisions.
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