Mumbai, Feb 6 (PTI) The Reserve Bank of India kept its benchmark interest rate unchanged on Friday, as expected, as inflation remained at manageable levels, and growth concerns eased following trade agreements with the US and the European Union.

The central bank's six-member Monetary Policy Committee (MPC) voted unanimously to keep the repurchase, or repo rate, at 5.25 per cent. The RBI retained its neutral policy stance, signalling rates will stay low for some time.

US President Donald Trump earlier this week announced a cut in tariffs on Indian goods to 18 per cent from 50 per cent, easing a key pressure point on India's economy and markets. The first tranche of the pact is likely to be finalised by next month, which includes a reduction in US tariffs.

Announcing the decisions of the MPC, RBI Governor Sanjay Malhotra said external headwinds have intensified, but the successful completion of the trade deal with the United States bodes well for the economy.

The RBI has cut rates by a total of 125 basis points since February 2025, marking its most aggressive easing cycle since 2019. It reduced rates by 25 basis points at its previous meeting in December.

While the inflation remains benign, economic activity remains resilient.

"Amidst heightened geopolitical tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. Inflation remains below the tolerance band, and its outlook continues to be benign," Malhotra said.

"With the signing of a landmark trade deal with the European Union and the US trade agreement in sight, growth momentum is likely to be sustained for a longer period." The current policy rate is appropriate, the governor said, adding that inflation was benign and future rate moves will depend on growth outlook and inflation.

"Inflation, especially underlying inflation, is low. It's much lower than even our forecast...underlying inflation is very, very benign. So, I expect policy rates should remain at low levels for a long time," he told reporters post MPC announcement.

"Whether they will go down even further, I will leave it for the MPC to decide going forward." As to policy transmission on the deposit side, he said transmission happens at a slower pace.

"It has improved. It is improving after every policy statement. We are hopeful that they will further continue to improve," he said.

"The real rate of interest today is very low. Going forward, we are in an accommodative phase." Malhotra said no assessment has been done on how much the trade deal will contribute to the GDP growth because details are not available.

"We have added 20 basis points to GDP growth because of various reasons, including the US trade deal." Consumer price inflation is projected at 2.1 per cent for the current financial year, marginally higher than the earlier estimate of 2 per cent, but below RBI's target of 4 per cent. Inflation in Q4 FY26 is expected to remain above 3 per cent, while CPI in H1 FY27 is estimated to stay above the 4 per cent mark.

The central bank revised its GDP growth estimate for the current FY26 upward to 7.4 per cent from the earlier projection of 7.3 per cent.

For the first half of FY27 (April 2026 to March 2027 fiscal), growth is now projected at 6.95 per cent, higher than the previous estimate of 6.75 per cent. However, the RBI refrained from providing a full-year FY27 projection, stating that it would await the release of the revised GDP base series before making comprehensive growth assessments.

Announcing additional measures, Malhotra said the RBI will issue three draft guidelines relating to mis-selling, recovery of loans and engagement of recovery agents, and on limiting the liability of customers in unauthorised electronic banking transactions.

"It is also proposed to introduce a framework to compensate customers up to an amount of Rs 25,000 for loss incurred in small-value fraudulent transactions," he said.

It will also publish a discussion paper on possible measures to enhance the safety of digital payments. Such measures may include lagged credits and additional authentication for specific classes of users, like senior citizens.

He also proposed doubling the limit for collateral-free loans to MSMEs to Rs 20 lakh and allowing banks to lend to REITs to promote financing to the real estate sector.

Also, NBFCs having no public funds and customer interface, with asset size not exceeding Rs 1,000 crore, are proposed to be exempted from the requirement of registration.

The requirement for certain NBFCs to obtain prior approval to open more than 1,000 branches is also to be dispensed with.

For financial markets, Malhotra said the RBI proposes to remove the limit of Rs 2.5 lakh crore for investments under the Voluntary Retention Route (VRR). Investment through the VRR in each category of securities will be subject to the investment ceiling for the respective category under the general route.

"The Indian economy continues to register high growth despite a challenging external environment clouded by geopolitical uncertainties. Benign inflation provides the leeway to remain growth-supportive while preserving financial stability. We remain committed to meeting the productive requirements of the economy and sustaining the growth momentum," he added.

Commenting on the MPC decisions, Amar Ambani, Executive Director and Head of Institutional Equities, Yes Securities, said, "Given the cumulative easing of around 125 basis points already delivered in the current cycle, the RBI is widely expected to keep policy rates unchanged at least until the first half of FY27".

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank, however, said, "While uncertainty remains on the growth-inflation figures as we await the new series, the uptick in commodity prices and weaker currency may pose upside risks to inflation. We therefore see limited room for additional easing on the repo rate front, with RBI's focus expected to be on ensuring stability on the liquidity front in the year ahead". PTI DP NKD ANZ DR CS ANZ BAL BAL