RBI to Maintain Repo Rate Amid Geopolitical Tensions

The Reserve Bank of India is expected to keep the policy repo rate unchanged at 5.25% during the upcoming Monetary Policy Committee meeting, maintaining a neutral stance. Rising geopolitical tensions and soaring oil prices above $100 per barrel have increased market volatility, affecting India's economic outlook.

The Reserve Bank of India (RBI) is poised to maintain the policy repo rate at 5.25% during the forthcoming Monetary Policy Committee (MPC) meeting, according to a report from Bank of Baroda. The report underscores significant global changes since the RBI's prior policy announcement in February 2026.

The recent outbreak of conflict in Iran has escalated concerns across the Middle East, damaging infrastructure in key oil-exporting economies. This situation has nearly closed the Strait of Hormuz, driving global oil prices beyond $100 per barrel. The report suggests, "We expect RBI to hold policy repo rate unchanged at 5.25% and keep the stance as neutral."

Amid escalating geopolitical tensions, global central banks are bracing for the inflationary impact of elevated oil prices. With volatility in financial markets pressuring foreign portfolio investments in India, equity markets, bond yields, and the Indian rupee, the RBI is anticipated to release growth and inflation forecasts for the year, taking the conflict's economic implications into account.

While the central bank is expected to remain vigilant and maintain its neutral stance, the report indicates a potential end to the rate cut cycle, with a prolonged pause envisioned. As the conflict's effect on growth and inflation becomes clearer in the coming months, the RBI may reevaluate its policy direction.

Should oil prices sustain above $100 per barrel and inflation rise past the RBI's 6% tolerance threshold, a rate hike by the fiscal year's end could be possible. During the upcoming policy review on April 6, 7, and 8, measures to support liquidity and stabilize the rupee may also be on the table. Governor Sanjay Malhotra is set to announce the policy outcome on the final day at 10 AM.

(With inputs from agencies.)