All eyes are on the Reserve Bank of India (RBI) as its Monetary Policy Committee begins a 3 day meeting today, with the final policy decision scheduled to be announced on February 6 by RBI Governor Sanjay Malhotra. This is the last MPC meeting of FY26 and markets are closely watching whether the central bank will cut rates further or maintain the current stance.
The meeting comes soon after the Union Budget for FY27, presented on February 1. The government announced a 12% increase in capital expenditure and set the fiscal deficit target at 4.3%. Gross market borrowings are estimated at Rs 17.2 trillion for FY27, higher than Rs 14.6 trillion in FY26. These fiscal signals are expected to play a role in the RBI’s policy assessment.
Global and trade developments are also part of the backdrop. Expectations are building around a long awaited India US trade deal, with the US cutting tariffs on India to 18%. The recently signed India EU free trade agreement is another key factor likely to be considered when the RBI Governor outlines policy decisions later this week.
Against this backdrop, a domestic brokerage expects the RBI to keep the repo rate unchanged at 5.25% after a cumulative easing of 125 basis points, while retaining a neutral stance. “Transmission to bank lending rates is in progress and bond yields have been quite sticky. Hence, for now, the central bank is likely to focus more on liquidity management than rate action. In this regard, the trade deal between US and India shall help support foreign flows and INR, which gives RBI leeway to manage domestic liquidity,” the note said. The current rate cycle began in February 2025 with a 0.25% cut, followed by similar cuts in April and December, and a sharper 0.50% reduction in June, taking the repo rate to 5.25% from 6.25% a year earlier.
Also read: Viksit Workforce for a Viksit Bharat
Do Follow: The Mainstream formerly known as CIO News LinkedIn Account | The Mainstream formerly known as CIO News Facebook | The Mainstream formerly known as CIO News Youtube | The Mainstream formerly known as CIO News Twitter
About us:
The Mainstream is a premier platform delivering the latest updates and informed perspectives across the technology business and cyber landscape. Built on research-driven, thought leadership and original intellectual property, The Mainstream also curates summits & conferences that convene decision makers to explore how technology reshapes industries and leadership. With a growing presence in India and globally across the Middle East, Africa, ASEAN, the USA, the UK and Australia, The Mainstream carries a vision to bring the latest happenings and insights to 8.2 billion people and to place technology at the centre of conversation for leaders navigating the future.
