India News

The Reserve Bank of India’s Monetary Policy Committee met from 3 to 5 August 2026 — its third bi-monthly review of FY27 — and voted unanimously to leave the policy repo rate unchanged at 5.25%, retaining a neutral stance. It was the fourth consecutive hold.

Rate stability gives lenders and insurers clearer visibility on funding costs and product pricing through the festive quarter. Real-estate and housing-finance bodies publicly welcomed the continuity for exactly this reason.

For life insurers, a stable rate environment supports guaranteed-return and non-participating product pricing, where reinvestment risk is the central actuarial concern.

The binding constraint on the next cut is crude, not domestic demand. Watch the oil path in the Global News section above as the leading indicator for the October review.

Governor Sanjay Malhotra pointed to the continuing conflict in West Asia and the resulting disruption to trade routes as sources of external volatility that argued for policy continuity. Domestic inflation was also drifting up rather than down: June CPI came in at 4.38% against 3.93% in May, with food inflation at 5.32%, and July readings were around 4.45%. Inflation remained comfortably inside the RBI’s 2–6% tolerance band, but not at a level that would justify cutting further while crude prices were rising.

In effect, the easing cycle that began in February 2025 is suspended rather than reversed. The 125 basis points of cuts already delivered remain in the system, and further reductions now require a material improvement in both global conditions and the domestic inflation trajectory. A basis point is one hundredth of a percentage point, so 125 basis points equals 1.25 percentage points.

On 31 August the National Statistics Office reported that the Indian economy grew 7.8% in Q1 FY27 — against the RBI’s own projection of 7% for the quarter. Real GDP was estimated at ₹81.36 lakh crore versus ₹75.46 lakh crore a year earlier, while nominal GDP rose 10.3% to ₹88.27 lakh crore. Real Gross Value Added, which measures output net of taxes and subsidies, grew 8.2%.

The composition was encouraging for anyone underwriting corporate or retail credit risk. Manufacturing GVA expanded 9.2% and capital goods production rose 15.2% — the latter a useful forward indicator of private capital expenditure. The secondary sector as a whole grew 8.6%, against 6.1% in the comparable quarter. For context, FY26 real GDP growth was 7.7%.

The gap between forecast and outcome has drawn scrutiny, including questions about the implied GDP deflator of around 2.5% sitting alongside retail inflation near 3.9% and wholesale inflation above 9%. These measures cover different baskets and are not designed to converge, but the divergence is worth noting when reading nominal growth figures.

• Polymer banknotes: The Governor confirmed that plastic-based currency notes are expected from the beginning of FY28, subject to field trials. The government has approved printing two billion polymer notes for testing — one billion each of ₹10 and ₹20 denominations. Polymer notes are more durable and harder to counterfeit than paper.

• Banking-sector proposals: A set of reform measures aimed at reducing intermediation costs and improving operational efficiency was placed alongside the policy statement.

• FCNR(B): The RBI clarified there is no proposal to end the Foreign Currency Non-Resident (Bank) deposit scheme early.

Content in this edition was compiled from publicly available reporting and primary institutional material published between June and early September 2026, and cross-referenced across outlets before drafting.