Repo Rate Unchanged
The Reserve Bank of India's Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, has concluded its final bi-monthly meeting for the fiscal
year 2025-26 and announced its key decision: the policy repo rate will remain steady at 5.25%. This means that the benchmark interest rate at which banks borrow from the central bank will not see a reduction at this juncture. Concurrently, the Standing Deposit Facility (SDF) rate remains at 5.00%, and the Marginal Standing Facility (MSF) rate, along with the Bank Rate, continues to be pegged at 5.50%. This stable interest rate environment is a significant takeaway from the meeting, signaling a cautious approach by the central bank amidst evolving economic indicators. The RBI's stance has also been described as 'neutral', indicating no bias towards either tightening or loosening monetary policy in the immediate future.
Future Policy Focus
Looking ahead, the RBI's monetary policy for the entire financial year starting April 1 will be guided by a new series of Gross Domestic Product (GDP) data. This data is slated for release later in February. This strategic shift underscores the central bank's commitment to basing its crucial policy decisions on the most current and comprehensive economic indicators available. The MPC's decision to keep the repo rate unchanged follows a cumulative reduction of 125 basis points that was implemented since February 2025. This policy review is particularly timely, occurring shortly after significant national events such as the presentation of the Union Budget for 2026-27 and the announcement of an India-US trade agreement, both of which have the potential to influence the nation's economic trajectory.
Customer Compensation Update
In a move that will offer much-needed relief to customers impacted by financial fraud, the Reserve Bank of India has announced a compensation framework. Fraud-hit customers will be eligible for reimbursement up to a maximum of Rs 25,000, or alternatively, 85% of the fraudulent amount debited from their accounts, whichever is lower. This decision highlights the RBI's proactive stance in safeguarding consumer interests and reinforcing trust in the digital financial ecosystem. The specific guidelines and implementation details for this compensation mechanism are expected to be elaborated further, providing a clear recourse for individuals who have fallen victim to various forms of financial malfeasance.
Inflationary Trends
On the inflation front, recent data indicates a moderation in price rise. Provisional figures released by the Ministry of Statistics and Programme Implementation show that consumer price inflation stood at 1.33% year-on-year in December 2025. This represents a notable decrease when compared to the inflation rate recorded in December 2024. The downward trend in inflation is a positive sign for the economy, potentially providing more room for the RBI to maintain accommodative monetary conditions without stoking excessive price pressures. This current inflation level is well within the RBI's target range, contributing to the overall stability that underpins the decision to keep the repo rate unchanged for now.
