RBI MPC Policy Meeting: Sanjay Malhotra Keeps Repo Rate Unchanged For 2nd Time Ahead Of Diwali

In its October meeting, the Reserve Bank of India's monetary policy committee voted unanimously to keep the benchmark policy repo rate unchanged. The RBI has decided to keep the repo rate to 5.5%, announced RBI Governor Sanjay Malhotra on Wednesday, October 1.

The majority of the RBI MPC members voted to keep the RBI repo rate cut stance as neutral. The MPC voted to keep SDF rate at 5.25%, while the MSF rate and bank rate remain at 5.75%.

RBI Policy: Inflation Forecast

The RBI has also lowered the inflation forecast for the financial year 2025-26 to 2.6% from 3.1%. The Goods and Services Tax (GST) reduction will have a sobering impact on inflation, but outlook will remain clouded due to external uncertainties, said RBI Governor.

RBI Policy: GDP Growth Forecast

Given the current macroeconomic situation, the RBI has revised Gross Domestic Product (GDP) growth estimates for the financial year 2025-26 to 6.8% from 6.5%. The RBI has also upgraded GDP Q2FY26 estimates from 6.7% to 7%. However, the GDP growth estimates for the third and fourth quarter has been reduced to 6.4% and 6.2% respectively.

"Despite an external environment that has deteriorated since August policy, the Indian economy remain poised to register high growth. The sobering of inflation has given leeway for monetary policy to support growth, while compromising on the primary mandate of price stability. The MPC decided to wait for the cumulative impact of the recent policy actions to play out before charting the next course of action," said Malhotra while concluding his RBI MPC October speech.

Earlier, GoodReturns poll of 30 economists indicated that the RBI may again go for a rate cut pause in October, just like in August. Out of 30 economists surveyed, 17 anticipate no change in the repo rate, while 13 expect a rate cut, mostly by 25 basis points.

Despite having some room to lower rates, experts remain cautious due to potential growth risks from US tariffs, resulting in a majority expecting the RBI to maintain its current stance for the rest of the year.

Some experts believed that the RBI may opt for a rate cut pause and may go for another cut in December after evaluating the geopolitical situation and impact of tariff-hike and GST rate cuts.

"The consensus view of "no rate cut" in October seems driven more by the RBI's June and August policy guidance than by the current macro realities. However, we believe there are enough reasons for the RBI to depart from its recent guidance, deliver a further 25bps easing in October, and adopt an open-ended policy approach/guidance for more easing ahead," stated Emkay Research in its report earlier.

The decision has come after the RBI front-loaded nearly 100 basis points of rate cuts in previous meetings since the beginning of 2025. The RBI MPC's repo rate decision in October came against the backdrop of the implementation of Goods and Services Tax (GST) 2.0. Meanwhile, India's inflation also saw some revival in August, even though it remained close to its record-low mark.

In August, the RBI had kept the repo rates unchanged. Earlier in June, the central bank had reduced the repo rate cut by 50 basis points, a predictable step given the prevailing global and domestic environment.

According to experts, the inflation rate is likely to remain as per the expectations given above normal monsoon and food production. - India's consumer price inflation rose to 2.07% in August 2025 from 1.61% in July, marking the first monthly increase in ten months. Despite this uptick, inflation remains below the RBI's 4% target and within its prescribed tolerance band, with higher food prices driving the increase.