RBI Policy August 2026: Repo Rate Held at 5.25%
Why in the news
The MPC reviewed macroeconomic and financial conditions in August 2026 and left the policy rate untouched, with every member agreeing.
Key facts
| Item | August 2026 position |
|---|---|
| Policy repo rate (LAF) | 5.25%, unchanged, 6-0 vote |
| Standing Deposit Facility | 5.00% |
| MSF, Bank Rate | 5.50% |
| Policy stance | Neutral, retained |
| FY27 CPI inflation | 5.0% (10 bps lower) |
| Real GDP growth FY27 | 6.7%, up from 6.6% |
| Previous rate change | December 2025 |
| Following MPC meeting | 5-7 October 2026 |
About the LAF corridor
The Liquidity Adjustment Facility is the main tool for handling daily liquidity in banking. It works through a band of three rates.
| Rate | Level | Role |
|---|---|---|
| SDF | 5.00% | Floor; banks park surplus funds with RBI without collateral; brought in April 2022 in place of the fixed reverse repo |
| Repo | 5.25% | Policy rate; RBI lends short-term against government securities |
| MSF | 5.50% | Ceiling; overnight borrowing beyond normal limits, using SLR securities |
| Bank Rate | 5.50% | Long-term lending without collateral; tied to MSF; applied for penal purposes |
The band is even on both sides: 25 basis points above and below repo. A tighter band signals firmer control over overnight money rates.
Policy stance
- Accommodative: leans towards easing to support growth.
- Neutral: no fixed bias; the MPC can move either way with data.
- Withdrawal of accommodation / tightening: leans towards higher rates or reduced liquidity.
Exam angle
- Statutory sections: 45ZB (constitution of MPC), 45ZA (target), 45ZN (failure report).
- Descriptive themes: monetary policy as a blunt tool against supply shocks; the rupee, capital flows and US yields channel.
- Key distinction: SDF is uncollateralised, repo and MSF need government securities.