“The MPC decision to hold the repo rate at 5.25% is on expected lines. As retail inflation has still not crossed the 6% upper band this outcome is not surprising. Brent crude falling below 80 per barrel is an added comfort and the 10bps reduction in FY27 retail inflation forecast to 5% is attributable to lower crude.
The upward revision to GDP growth forecasts reinforces the limited impact to Indian economy from external shocks and augurs well for bank credit growth and profitability. Ample liquidity due to FCNR(B) flows will further catalyse credit growth in the banking system. Bond yields may also show some stability taking a cue from inflation forecasts.
The neutral policy stance, however, leaves room for a move in either direction in the ensuing policies depending on incoming data. Since economic growth is an important consideration at this juncture, a pause makes sense as rate hikes could strain consumption and growth. Overall, the MPC tone strikes a fine balance between growth-inflation dynamics while stressing future decisions to be data dependent.
At Canara Bank, we remain focused on Retail, Agriculture, MSME, and digital‑first lending, alongside priority areas such as infrastructure and green energy financing, to ensure credit flows to sectors that drive sustainable and inclusive growth.”
