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RBI Highlights Strong Reserves and Credit Amid Global Risks
India’s central bank raised its main interest rate to 5.5% and said it would carefully watch what happens next.
Governor Sanjay Malhotra said foreign investment in factories and businesses has increased.
But overseas investors who buy shares and bonds have also been taking money out of Indian markets.
India has a large supply of foreign currency, which can help the country pay for imports and handle shocks.
Banks are lending more, and the report said their financial health has improved.
The central bank also noted that more people and businesses are borrowing.
Events around the world, including conflict in West Asia and costly oil, could make things harder.
India’s trade in services and money sent home by people abroad offer some support.
The RBI raised the repo rate by 25 basis points to 5.5% and shifted its stance to “calibrated tightening.”
Net FDI inflows reached $13.8 billion in April-August 2026, while foreign portfolio investors recorded $10.3 billion in net outflows through 5 October.
Foreign exchange reserves stood at $734.6 billion on 2 October, providing about 11 months of import cover.
Bank credit grew 18.1% year-on-year as of 15 September, while bank capital and asset-quality indicators improved.
The RBI cited West Asia conflict, high oil prices, higher global bond yields, a stronger dollar and fragile market sentiment as risks.
- Who
- The Reserve Bank of India and Governor Sanjay Malhotra.
- What
- The RBI raised its repo rate and assessed India’s investment, reserves, credit conditions and external risks.
- Where
- India, in the context of global financial conditions.
- When
- The policy decision was announced on Wednesday; the article cites financial data from April to October 2026.
- Why
- The RBI cited rising inflation risks and a challenging global environment while assessing the economy.
Resilience and strength
Risks and pressures
Foreign investment
Resilience and strength
Net FDI inflows rose, gross FDI grew 20.6%, and India ranked third globally in announced greenfield FDI projects during April-August 2026.
Risks and pressures
Foreign portfolio investors recorded net outflows of $10.3 billion between April and 5 October amid global uncertainty, higher bond yields and elevated oil prices.
External position
Resilience and strength
Foreign exchange reserves were $734.6 billion, while services, remittances and trade agreements were cited as sources of resilience.
Risks and pressures
The merchandise trade deficit widened to $58.7 billion in July-August 2026, and the RBI flagged high energy prices, trade uncertainty and global financial pressures.
Key facts
- Repo rate
- Raised by 25 basis points to 5.5%.
- Policy stance
- Changed to “calibrated tightening”; the committee kept open the possibility of another hike or a pause.
- Net FDI inflows
- $13.8 billion in April-August 2026, compared with $9.6 billion a year earlier.
- FPI flows
- Net outflows of $10.3 billion between April and 5 October 2026.
- Foreign exchange reserves
- $734.6 billion as of 2 October 2026; around 11 months of import cover and 94.4% of external debt.
- Bank credit growth
- 18.1% year-on-year as of 15 September 2026, compared with 10.4% a year earlier.
- Current account deficit
- 0.5% of GDP, or $4.2 billion, in the first quarter of FY27.
Sources
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