The Reserve Bank of India’s Monetary Policy Committee (MPC) has wrapped up its three-day deliberation, with RBI Governor Sanjay Malhotra set to announce the bi-monthly monetary policy on Friday. Markets, lenders and borrowers are watching closely as expectations remain split between a 25-basis-point rate cut and the possibility of the central bank maintaining a status quo.
The review comes at a time when inflation has significantly cooled, GDP growth continues to surprise on the upside, the rupee has breached 90 per dollar, and global geopolitical tensions persist. The RBI has already cut the repo rate by 100 basis points in three phases since February, supported by a steady decline in CPI-based inflation.
For now, headline inflation is below the lower bound of 2 per cent set by the government, while the Indian economy posted a better-than-expected 8.2 per cent GDP growth in Q2, strengthening the case for boosting growth further through softer lending rates.
Experts split on rate cut vs. pause
Economists and analysts are evenly divided this time.
A section of experts believes a 25 bps rate cut is justified, given the prolonged disinflation trend, which offers room for further monetary easing without risking price stability. Some point out that even with a mild rebound expected towards FY26 end, inflation remains comfortably inside RBI’s tolerance band.
However, an equally strong group argues the RBI may prefer to hold rates at 5.5 per cent to maintain monetary space, especially as India’s growth momentum is robust and capital flows stable.
Market voices
Industry observers underscore the delicate balancing act:
Raoul Kapoor (Andromeda Sales & Distribution) expects a 25 bps rate cut, saying it would give meaningful relief to home and auto loan borrowers, reduce borrowing costs, and spur demand in consumption- and investment-driven sectors.
Atul Monga (BASIC Home Loan) holds the opposite view, expecting no change in the repo rate. According to him, while a pause could offer stability going forward, borrowers with floating-rate loans from the past two years may not immediately feel relief.
What to expect beyond rates
Apart from the interest rate decision, the RBI is also likely to revise GDP expectations upward. The central bank had already raised its FY26 forecast in October from 6.5 per cent to 6.8 per cent, and stronger-than-expected first-half numbers may prompt another upward revision.
At a glance: Key expectations before the policy
| Area | Outlook |
|---|---|
| Repo rate | 25 bps cut or status quo |
| Borrowing costs | Likely relief if rates are lowered |
| CPI inflation | Below lower tolerance level; room for easing |
| GDP forecast | Expected to be revised upward |
| Economic backdrop | Strong growth + cooling prices |
