Archive · 5 Aug 2026
No hike, no panic: RBI holds rates, raises GDP forecast
The Reserve Bank of India is the grown-up bank that decides how much it costs to borrow money in India.
This week it decided to keep things exactly the same, holding interest rates at 5.25%.
That is the fourth time in a row the bank has kept the rate unchanged.
The bank's leader, Sanjay Malhotra, says India's economy is strong and resilient.
He even raised his prediction for how fast India's economy will grow this year.
There is a war in Iran that makes oil more expensive, and India buys almost all of its oil from other countries.
Expensive oil can push up prices, but the bank wants to wait and see if prices calm down before taking action.
Most experts think the bank will keep waiting, though one expert thinks borrowing costs might go up a little before March.
The rupee, India's money, is also down about 5.4% this year, so the bank is being careful.
The RBI unanimously held its benchmark interest rate at 5.25% for a fourth straight meeting — a related report described it as the third time in a row — retaining a 'neutral' policy stance.
Governor Sanjay Malhotra raised India's GDP growth forecast for the financial year to 6.7% from 6.6%.
Inflation remains below the RBI's 6% ceiling but above its preferred 4% level, with food and fuel price risks flagged.
India imports nearly 90% of its crude oil, leaving it exposed to oil price spikes from the Iran war; the rupee is down 5.4% this year despite $41 billion in foreign inflows.
The RBI is bucking a tightening trend by central banks in Japan, Australia and Indonesia, and most economists expect no rate hikes this year.
- Who
- Reserve Bank of India Governor Sanjay Malhotra and the central bank's six-member rate-setting panel.
- What
- Held the benchmark interest rate unchanged at 5.25% for a fourth straight meeting and raised the GDP growth forecast to 6.7%.
- When
- Wednesday, at the RBI's latest monetary policy review; the next inflation reading and fresh GDP figures are due later this month.
- Where
- India.
- Why
- The RBI believes India's growth is resilient and inflation remains contained, and wants to wait for evidence on whether Iran war-driven oil price spikes prove temporary.
Wait-and-Watch: No Rate Hikes Expected
Tightening Ahead: Rate Hikes Possible
Interest Rate Outlook
Wait-and-Watch: No Rate Hikes Expected
Most economists, including Emkay's Madhavi Arora and HDFC's Sakshi Gupta, expect no rate hikes this year, arguing the bar for a hike is high and inflation pressures are mostly temporary oil and food price spikes.
Tightening Ahead: Rate Hikes Possible
Upasna Bhardwaj, chief economist at Kotak Mahindra Bank, sees the possibility of a total of 50 basis points of hikes in the RBI's key policy rate between now and the end of the financial year next March.
Oil Shock Impact on India
Wait-and-Watch: No Rate Hikes Expected
The RBI argues India's growth is resilient, inflation pressures remain contained, and the spike in oil prices caused by the Middle East conflict will prove temporary rather than the start of a broader inflation surge.
Tightening Ahead: Rate Hikes Possible
Risks are piling up: food prices remain vulnerable if patchy monsoon rains hit harvests, consumer goods companies are preparing fresh price increases, and India's near-90% crude oil import dependence leaves it exposed to any prolonged spike in global energy costs, while the rupee stays under pressure.
- Key policy rate
- 5.25%
- Policy stance
- Neutral
- Panel vote
- Unanimous (six-member panel)
- GDP growth forecast
- 6.7%, raised from 6.6%
- Inflation
- Below 6% ceiling, above 4% preferred level
- Crude oil imports
- Nearly 90%
- Rupee performance
- Down 5.4% for the year
- Foreign inflows
- $41 billion so far