RBI MPC February 2026: Repo Rate Held at 5.25% as RBI Prioritises Stability Over Fresh Easing

The Reserve Bank of India (RBI) concluded its February 2026 Monetary Policy Committee (MPC) meeting on February 6 with a clear and deliberate message for markets: the easing cycle has done its job for now, and the focus has shifted to stability and transmission.

As widely expected, the MPC unanimously decided to keep the policy repo rate unchanged at 5.25%, following cumulative rate cuts of 125 basis points over FY25–26. The central bank also retained its neutral policy stance, signalling flexibility amid evolving inflation and growth dynamics.

A Policy Pause After Aggressive Rate Cuts

This policy meeting came at an important inflection point. After delivering one of the most front-loaded easing cycles in recent years, RBI appears comfortable letting earlier rate cuts work their way through the economy. Lending rates have started to soften, liquidity conditions remain adequate, and credit growth, especially to productive sectors, has stayed resilient.

By choosing a pause, RBI has avoided overstimulating the economy at a time when inflation risks, though contained, are not entirely absent.

Inflation Outlook: Slightly Higher, But Still Manageable

One of the more closely watched elements of the February policy was the inflation outlook. RBI revised its CPI inflation projections modestly upward, with FY27 Q1 now seen at 4.0% and Q2 at 4.2%. These changes largely reflect base effects and technical adjustments linked to changes in food weights in the upcoming CPI series, rather than a sharp deterioration in price pressures.

Importantly, inflation remains close to the 4% target, reinforcing RBI’s confidence that price stability is broadly intact. This has given the central bank room to pause without compromising its inflation mandate.

Growth Outlook: India in a “Goldilocks Phase”

On the growth front, RBI struck an optimistic tone. The Indian economy is currently operating in what it described as a “Goldilocks phase” strong enough to sustain momentum, but not overheated. FY26 growth is estimated at around 7.4%, supported by resilient domestic demand, improving private investment, and sustained government capital expenditure.

Recent developments have added further support to the outlook. Trade momentum from the India–US framework and progress on the EU Free Trade Agreement, combined with the 11.5% capex hike in Union Budget FY27, are expected to provide a durable growth impulse over the medium term.

Governor Sanjay Malhotra’s Key Takeaways

Governor Sanjay Malhotra used the post-policy press conference to underline RBI’s cautious but confident stance. He emphasised that the central bank is closely monitoring global uncertainties, particularly movements in bond yields, capital flows, and liquidity conditions.

Rather than pushing for further rate cuts, RBI’s priority is ensuring effective monetary transmission and maintaining financial stability. The governor also acknowledged the importance of fiscal discipline, noting that the government’s FY27 fiscal deficit target of 4.3% of GDP provides a supportive macro backdrop.

A notable developmental announcement was the increase in collateral-free MSME loan limits from ₹10 lakh to ₹20 lakh, aimed at easing credit constraints for small businesses and supporting grassroots economic activity.

Market Implications and the Road Ahead

Markets had largely priced in a pause, and the policy outcome did little to disrupt financial assets in the immediate aftermath even as both Nifty 50 and Bank Nifty slipped around 0.5% post the announcement. The bigger question now is not whether rates will be cut again soon, but how effectively the previous easing cycle feeds into consumption, housing demand, and private investment.

Going forward, RBI’s actions will hinge on incoming inflation data, global financial conditions, and signs of stress or strength in domestic demand. Any shift in stance will likely be data-driven rather than pre-announced.

Bottom Line

The RBI MPC February 2026 decision reflects a central bank that is confident in India’s macro fundamentals and unwilling to rush policy moves. With inflation broadly anchored and growth holding firm, RBI has chosen patience over stimulus.

For borrowers, investors, and businesses alike, the message is clear: the focus now is on transmission, not fresh rate cuts. If current conditions persist, RBI has bought itself time, and in monetary policy, that may be its most valuable tool.

How Markets Absorbed the RBI's Rate Pause in the Fortnight After the Decision

The Monetary Policy Committee voted unanimously on 6 February 2026 to keep the repo rate at 5.25 per cent, with the standing deposit facility rate at 5.00 per cent and the marginal standing facility rate at 5.50 per cent. The stance stayed neutral, though Prof. Ram Singh preferred an accommodative stance. The RBI projected CPI inflation at 4.0 per cent for Q1 2026-27 and 4.2 per cent for Q2, and GDP growth at 6.9 per cent and 7.0 per cent for the same quarters.

Equity indices were choppy on decision day. The Nifty 50 fell as low as 25,491.90, which was 0.59 per cent below the previous close, but ended at 25,693.70, up 0.20 per cent. Nifty Bank touched 59,644.55, 0.70 per cent below its prior close, and finished at 60,120.55, up 0.09 per cent. The 10-year government bond yield stood at 6.65 per cent on 5 February, against 6.51 per cent on 4 December 2025.

Over the next two weeks the two indices parted ways. By 20 February the Nifty 50 closed at 25,571.25, 0.48 per cent below its 6 February level, while Nifty Bank closed at 61,172.00, 1.75 per cent higher. The RBI noted that lending rates on fresh loans had fallen 105 basis points between February and December 2025, after the cumulative 125 basis points of repo cuts.