RBI Monetary Policy February 2026: Governor Malhotra Maintains Repo Rate at 5.25% Amidst "Goldilocks" Economy

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) concluded its first meeting of the 2026 calendar year on February 6, 2026. In a move that largely aligned with financial analyst expectations and the fiscal direction set by the Union Budget 2026-27, Governor Sanjay Malhotra announced a status quo on the key policy rates.

This article provides a comprehensive deep dive into the RBI Monetary Policy February 2026, exploring the rationale behind the decision, revised GDP growth forecasts, inflation outlook, and what this means for the common man’s EMIs and the broader Indian economy.

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The Headline Decision: Repo Rate Remains Unchanged

The MPC, led by Governor Sanjay Malhotra, voted unanimously to keep the policy repo rate at 5.25%. This decision marks a pause following a series of aggressive rate cuts throughout 2025, which saw the repo rate drop by a cumulative 125 basis points from its peak.

By maintaining the status quo, the RBI has signaled a "wait-and-watch" approach. The standing deposit facility (SDF) rate remains at 5.00%, while the marginal standing facility (MSF) rate and the Bank Rate stand firm at 5.50%. The committee also decided to retain its "neutral" stance, providing the central bank with the flexibility to move in either direction based on incoming macroeconomic data.

India’s "Goldilocks" Economy: Upgraded GDP Growth Projections

One of the most significant highlights of the February 2026 RBI Policy was the upward revision of India’s growth forecast. Governor Malhotra described the current state of the Indian economy as a "Goldilocks period"—a rare phase where growth is robust, yet inflation remains under control.

• FY26 GDP Forecast: The RBI has raised its real GDP growth projection for the current fiscal year (2025-26) to 7.4%, up from previous estimates.
• FY27 Outlook: Looking ahead to the next fiscal year, the RBI projected growth for Q1 at 6.9% and Q2 at 7.0%.

This optimism is rooted in several factors:

1. Strong Domestic Demand: Consumer spending has shown resilience, particularly in urban centers and the burgeoning middle class.
2. Manufacturing Upsurge: The "Make in India" initiatives and improved supply chains have bolstered industrial output.
3. Agriculture Resilience: Better-than-expected rabi sowing and healthy reservoir levels have provided a cushion for the rural economy.

The Inflation Conundrum: Below Target, But Risks Persist

In a surprising revelation, the RBI projected CPI inflation for FY26 at a benign 2.1%. This is significantly lower than the RBI’s medium-term target of 4%. However, the Governor cautioned that this "low" is likely temporary.

The MPC expects inflation to edge back up toward the 4% mark in the first half of 2026-27 (FY27), with Q1 projected at 4.0% and Q2 at 4.2%. The upward revision for the coming quarters is attributed to:

• Volatility in Food Prices: Global climate shifts continue to pose a threat to crop yields.
• Geopolitical Tensions: Ongoing conflicts in key trade routes have kept shipping costs high.
• Commodity Prices: Specifically, the rise in precious metals and steady oil prices near $78 per barrel remain a concern for the import bill.

Liquidity Management: The ₹50,000 Crore OMO Infusion

To ensure that the "neutral" stance translates into actual financial stability, the RBI announced a proactive liquidity management strategy. The central bank conducted an Open Market Operation (OMO) purchase of ₹50,000 crore on February 6, 2026.

This move was designed to inject liquidity into a banking system that had seen tightening in the weeks leading up to the policy. By buying government securities, the RBI ensures that banks have enough cash to lend, preventing a spike in short-term interest rates and supporting the bond market.

Impact on Borrowers: Will Home Loan EMIs Fall?

For millions of Indian homeowners and car buyers, the big question is: "Will my EMI go down?"

Since the repo rate was kept at 5.25%, there will be no immediate reduction in floating-rate loans (like home loans) tied to the external benchmark lending rate (EBLR). However, because the RBI had cut rates by 125 basis points in 2025, many borrowers are still seeing the delayed effects of those previous cuts as banks reset their lending cycles.

For now, borrowers can expect stability. Banks are unlikely to hike rates, and with the liquidity infusion, there may even be competitive "teaser" rates offered by some lenders to capture the spring housing market.

Impact on Savers: Fixed Deposit Rates

With the repo rate holding steady, Fixed Deposit (FD) rates are expected to remain at their current levels for the foreseeable future. While savers might have hoped for a rate hike, the current environment of low inflation means that "real interest rates" (nominal rate minus inflation) remain attractive. For a senior citizen earning 7.5% on an FD while inflation is at 2.1%, the real gain is substantial.

Market Reaction: Stocks, Bonds, and the Rupee

The financial markets reacted with measured caution to the RBI Policy Announcement:

• Equity Markets: The Sensex and Nifty saw a minor dip, primarily because some traders were hoping for a "dovish" surprise or a small 25 bps cut to kickstart the year.
• Bond Market: The 10-year benchmark bond yield eased to 6.65% following the OMO announcement, indicating that the market welcomed the RBI’s commitment to maintaining liquidity.
• The Rupee: The Indian Rupee remained stable at approximately ₹90.19 against the US Dollar. The currency is currently supported by strong foreign portfolio investment (FPI) inflows and the recent signing of a major India-US trade framework.

New Data Series: A Move Toward Modernization

A technical but crucial announcement made by Governor Malhotra was that the RBI will adopt the newly revised GDP and CPI data series within two days. By updating the base year and the basket of goods used to measure the economy, the RBI aims to make its policy calibration more accurate and reflective of the modern Indian consumption pattern (which now includes higher spending on technology and services compared to a decade ago).

Key Takeaways for Investors and Businesses

1. Stability is the Theme: The RBI is prioritising stability over further stimulus. Businesses can plan their capital expenditure (CAPEX) with the confidence that interest rates won't skyrocket.
2. Focus on Quality Debt: With yields softening slightly, this is a good time for corporations to issue bonds.
3. Watch the Global Cues: The RBI’s "neutral" stance is a direct response to the uncertainty of the US Federal Reserve and European Central Bank policies. If global rates fall faster, the RBI may resume cuts later in 2026.

Conclusion

The RBI Monetary Policy of February 6, 2026, reflects a central bank that is confident in India’s growth story but remains vigilant against global headwinds. By keeping the repo rate at 5.25% and upgrading the GDP forecast to 7.4%, the RBI has signalled that the Indian economy is the "bright spot" in a world of slowing growth.

For the common citizen, this policy promises a period of predictability—stable EMIs, steady returns on savings, and an economy that is growing fast enough to create jobs without letting prices spiral out of control. As we move further into 2026, all eyes will be on the monsoon forecasts and global oil prices to see if the MPC maintains this neutral path or returns to the path of easing.