RBI keeps rates unchanged, signals dovish stance on policy

Investing.com -- The Reserve Bank of India kept interest rates unchanged at its policy meeting and maintained a neutral stance, according to a Macquarie analysis released Wednesday.

The central bank revised its GDP growth forecast for fiscal year 2027 upward by 10 basis points to 6.7%. The RBI also lowered its consumer price index projection by 10 basis points to 5.0% compared to its June 2026 policy.

Macquarie described the policy as dovish and said any decision to raise rates will be significantly influenced by external circumstances. The firm does not expect a rate hike in calendar year 2026.

The RBI's stated target is to maintain surplus liquidity at around 1% of Net Demand and Time Liabilities, which equals Rs2.8 trillion. July surplus stood at approximately Rs1 trillion, but has recently increased to Rs3.3 trillion and could rise further as Foreign Currency Non-Resident flows arrive.

The central bank has not communicated its stance on liquidity increases from FCNR flows, except to say it will maintain comfortable liquidity and ensure the weighted average call rate remains close to the repo rate of 5.25%.

The RBI proposed rationalizing the regulatory framework on interest rates for all regulated entities on a principle-based approach. The proposal aims to harmonize guidelines across regulated entities and standardize market practices concerning interest charging, including day count convention and benchmark reset dates.

Non-banking financial companies currently use what Macquarie views as an opaque mechanism for setting benchmark rates. The new regulations may require NBFCs to price loans based on the repo rate and marginal cost of funds-based lending rate.

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