RBI OCTOBER POLICY: KEY HIGHLIGHTS 

RBI hikes repo 25 bps, shifts to calibrated tightening

MUMBAI, OCT 7 : The Reserve Bank of India raised its policy rate by *25 basis points to 5.50%* and shifted its stance to calibrated tightening, putting near-term rate cuts firmly off the table as the central bank raises both its growth and inflation forecasts amid renewed energy-price and global financial-market risks.

POLICY ACTION

 MPC - unanimously raised repo rate by 25 bps to 5.50%*.

 -SDF raised to *5.25%*; MSF and Bank Rate to *5.75%*.

Stance shifted from neutral to *calibrated tightening*.

• RBI says the recalibration was warranted as inflation risks are no longer as benign as last year.

Rate cuts are off the table in the near term*; policy action ahead will be either a hike or a pause, depending on incoming data.

• Two MPC members, *Nagesh Kumar and Ram Singh*, preferred retaining a neutral stance.

GROWTH

• FY27 real GDP growth forecast raised to *7.1% from 6.7%*.
•  Q2 forecast raised to *7.2% from 6.4%*.
•  Q3 forecast raised to *6.9% from 6.5%*.
•  Q4 forecast retained at *6.8%*.
•  Q1 FY28 growth projected at *7.1%*.
•  Growth risks assessed as *evenly balanced*.
•  Q1 FY27 GDP grew *7.8%*, supported by private consumption, investment and net exports.
•  Manufacturing IIP grew *8.6% in July-August*, against 6.9% in Q1.
•  Personal loan credit grew *16.9% y/y in August*; UPI transactions rose *22.2%*.

INFLATION

• FY27 CPI inflation forecast raised to *5.2% from 5.0%*.
•  Q2 forecast raised to *4.9% from 4.7%*.
•  Q3 raised to *6.0% from 5.9%*.
•  Q4 raised to *5.7% from 5.5%*.
•  Q1 FY28 CPI forecast at *5.6%*, against 5.3% earlier.
•  FY27 core inflation forecast raised to *4.4% from 4.3%*.
•  CPI inflation averaged *4.8% in August*, up from 4.5% in July; core inflation was 4.2%.
•  RBI expects headline CPI to average *almost 5.8% over the next three quarters*.
•  MPC said limited evidence exists of supply-side pressures becoming embedded in pricing, but ‘inflation expectations and generalization risks have risen’.

GLOBAL & EXTERNAL RISKS

• West Asia conflict and crude-price volatility* remain major upside risks to inflation and external-sector stability.
• Rising global bond yields, an appreciating dollar and tighter global financial conditions add to pressure.
• Global growth is projected to decelerate in 2026, while global inflation is expected to rise sharply.
• RBI also flagged *AI-related valuation risks, high public debt and fiscal sustainability concerns*.

FX, CAPITAL FLOWS & RESERVES

• RBI reserves stood at *$734.6 billion as of October 2*, providing around *11 months of import cover* and 94.4% of external debt cover.
•  RBI reiterated its commitment to *orderly exchange-rate adjustment and curbing excessive volatility*.
•  FPI net outflows stood at *$10.3 billion during April-October 5*.
•  FDI inflows rose to *$13.8 billion in April-August*, from $9.6 billion a year earlier.
• Q1 FY27 current account deficit widened to *0.5% of GDP, or $4.2 billion*, from 0.4% a year earlier.
•  Services surplus rose to *$85.8 billion in April-August* from $79.9 billion.
• Merchandise trade deficit widened to *$58.7 billion in July-August*, driven by electronic goods and crude imports.
•  Merchandise exports rose *22.8% y/y to $88.1 billion, while imports increased ’15.8% to $146.9 billion’.

LIQUIDITY & FINANCIAL CONDITIONS

•  Average daily system liquidity surplus stood at *Rs 5.9 lakh crore* since the August policy.
•  RBI has conducted *55 VRRR auctions*, including two term-VRRR auctions, since the August policy.
•  RBI has also conducted *Rs 1 lakh crore of OMO sales*.
•  WACR remained in the lower half of the corridor; RBI said it will use a mix of liquidity-management tools to progressively align the WACR with the repo rate.
•  G-sec yields have hardened amid changing liquidity and inflation dynamics.

BANKING & FINANCIAL STABILITY

• Scheduled commercial bank credit grew *18.13% y/y* and deposits *17.31%* as of September 15.
•  Credit-deposit gap stood at *81 bps*.
•  SCB CRAR at *17.87%*; GNPA at *1.67%* versus 2.22% a year earlier; NNPA at *0.39%*.
•  LCR stood at *126.74%*.
•  NBFC CRAR remained robust at *25.50%*, with GNPA at *2.50%* and NNPA at *0.84%*.

KEY MARKET SIGNAL

* The October policy marks a clear *shift from accommodation to rate-risk management*.

* With growth forecasts upgraded but inflation risks repriced higher, the RBI is signalling that *growth no longer requires policy-rate support at the margin*.

* For markets, the combination of *25-bps tightening, calibrated-tightening stance, higher inflation forecasts and the explicit removal of near-term rate cuts* strengthens the case for a higher-for-longer domestic rate path.

* For the rupee, the policy leaves the central bank with a tighter-rate toolset while *oil, dollar strength, FPI outflows and global yields remain the key external pressure points*.

 ADDITIONAL MEASURES

* RBI announced interoperability measures among *NBFC Account Aggregators*.

* SEBI-regulated depositories will include deposit-account information in Consolidated Account Statements; implementation targeted by *December 31, 2026*.

* RBI will establish a *Technical Consultative Committee for Financial Markets* for structured engagement on policy and operational matters.

Team Eforexindia