Will your loan EMIs go up? Here's why RBI may leave rates unchanged this time
The RBI's rate decision will hinge on global geopolitical risks, the monsoon's progress and its impact on inflation, economists say
- Aug 3, 2026,
- Updated Aug 3, 2026 12:20 PM IST
The Reserve Bank of India's Monetary Policy Committee meets this week amid continued tensions in West Asia and concerns over a weak monsoon, which could affect food prices in the months ahead.
The rupee had also been under pressure against the US dollar earlier this year. However, the strong uptick in FCNR(B) deposit flows, which could help strengthen foreign exchange reserves, should give the central bank some comfort.
Against this backdrop, the MPC may remain cautious and watchful, maintaining status quo while pushing any possibility of a rate hike into the future.
Don't Miss: Worried about interest rate hike? Here's why the RBI MPC may leave the repo rate unchanged this time
In the June MPC meet, the repo rate was left unchanged at 5.25%, while the central bank announced several measures to boost foreign institutional investor flows in the country.
"Present growth-inflation dynamics point towards risks to growth with a manageable inflation trajectory in the immediate future. This, coupled with elevated global uncertainties, may result in the MPC not considering the rate hike option in a hurry," reckoned Mandar Pitale, head, financial markets, SBM Bank (India) Ltd.
According to him, the MPC is expected to deliver cautionary guidance, with global oil prices and the monsoon remaining key monitorables for future policy action.
Santanu Sengupta, chief India economist at Goldman Sachs, also expects the MPC to leave the repo rate unchanged and retain its neutral stance.
"We expect the MPC to retain a cautious tone on the outlook, particularly around El Niño-related weather risks and the still-elevated uncertainty from Middle East geopolitical tensions," said Sengupta.
Must Read: RBI MPC meeting: Repo rate pause likely as inflation, crude oil risks keep policymakers cautious
Earlier this year, the RBI announced a special window for banks to raise foreign currency FCNR(B) deposits, allowing them to raise such deposits and swap them at concessional rates.
According to the latest data, $40.81 billion has been cumulatively raised via FCNR(B) deposits, overseas foreign currency borrowings and external commercial borrowings.
Sengupta noted that since the rupee had stabilised following the RBI's measures, there was limited need for the MPC to turn more hawkish in the near term.
With crude oil prices below $95 per barrel, the RBI may revise its inflation forecast "modestly lower," he added.
Sonal Badhan, economist at Bank of Baroda, also sees the MPC in wait-and-watch mode this time. She expects MPC members to remain watchful of the progress of the monsoon and its impact on food inflation.
"Given that RBI estimates for Q1 growth had already factored in the impact of the US-Iran war on the Indian economy, we expect growth to come in line with these estimates (6.6-6.8%), giving the central bank no reason to alter its forecasts at this stage. In the case of inflation, upside risks remain from elevated global oil prices, a weak monsoon at home and lower water reservoir levels," Badhan noted.
Soumya Kanti Ghosh, group chief economic advisor at State Bank of India, also believes the MPC may keep rates unchanged, though its tone could still reprice expectations.
"The MPC may keep rates unchanged. But the current backdrop has made soft language costlier: oil volatility, rupee pressure, external-flow caution and higher inflation projections make an explicitly dovish message less likely," Ghosh stressed.
The Reserve Bank of India's Monetary Policy Committee meets this week amid continued tensions in West Asia and concerns over a weak monsoon, which could affect food prices in the months ahead.
The rupee had also been under pressure against the US dollar earlier this year. However, the strong uptick in FCNR(B) deposit flows, which could help strengthen foreign exchange reserves, should give the central bank some comfort.
Against this backdrop, the MPC may remain cautious and watchful, maintaining status quo while pushing any possibility of a rate hike into the future.
Don't Miss: Worried about interest rate hike? Here's why the RBI MPC may leave the repo rate unchanged this time
In the June MPC meet, the repo rate was left unchanged at 5.25%, while the central bank announced several measures to boost foreign institutional investor flows in the country.
"Present growth-inflation dynamics point towards risks to growth with a manageable inflation trajectory in the immediate future. This, coupled with elevated global uncertainties, may result in the MPC not considering the rate hike option in a hurry," reckoned Mandar Pitale, head, financial markets, SBM Bank (India) Ltd.
According to him, the MPC is expected to deliver cautionary guidance, with global oil prices and the monsoon remaining key monitorables for future policy action.
Santanu Sengupta, chief India economist at Goldman Sachs, also expects the MPC to leave the repo rate unchanged and retain its neutral stance.
"We expect the MPC to retain a cautious tone on the outlook, particularly around El Niño-related weather risks and the still-elevated uncertainty from Middle East geopolitical tensions," said Sengupta.
Must Read: RBI MPC meeting: Repo rate pause likely as inflation, crude oil risks keep policymakers cautious
Earlier this year, the RBI announced a special window for banks to raise foreign currency FCNR(B) deposits, allowing them to raise such deposits and swap them at concessional rates.
According to the latest data, $40.81 billion has been cumulatively raised via FCNR(B) deposits, overseas foreign currency borrowings and external commercial borrowings.
Sengupta noted that since the rupee had stabilised following the RBI's measures, there was limited need for the MPC to turn more hawkish in the near term.
With crude oil prices below $95 per barrel, the RBI may revise its inflation forecast "modestly lower," he added.
Sonal Badhan, economist at Bank of Baroda, also sees the MPC in wait-and-watch mode this time. She expects MPC members to remain watchful of the progress of the monsoon and its impact on food inflation.
"Given that RBI estimates for Q1 growth had already factored in the impact of the US-Iran war on the Indian economy, we expect growth to come in line with these estimates (6.6-6.8%), giving the central bank no reason to alter its forecasts at this stage. In the case of inflation, upside risks remain from elevated global oil prices, a weak monsoon at home and lower water reservoir levels," Badhan noted.
Soumya Kanti Ghosh, group chief economic advisor at State Bank of India, also believes the MPC may keep rates unchanged, though its tone could still reprice expectations.
"The MPC may keep rates unchanged. But the current backdrop has made soft language costlier: oil volatility, rupee pressure, external-flow caution and higher inflation projections make an explicitly dovish message less likely," Ghosh stressed.