RBI Hikes Repo Rate by 25 bps & Launches SME Growth Fund
By ThePip Desk
RBI raises repo rate to 5.50% to combat rising inflation and approves a new Rs 10,000 crore SME growth fund to support economic expansion.
After nearly three and a half years, the Reserve Bank of India’s Monetary Policy Committee unanimously decided to increase the policy repo rate under the liquidity adjustment facility by 25 basis points to 5.50 per cent to tame rising inflation.
Key Policy Rate Adjustments
The central bank adjusted several complementary lending and deposit rates following the policy meeting.
- Standing deposit facility rate adjusted to 5.25 per cent.
- Marginal standing facility rate set at 5.75 per cent.
- Bank rate set at 5.75 per cent.
- Monetary policy stance changed to calibrated tightening.
On the inflation front, the near term outlook points towards continued pressures from supply side factors on account of the deficient monsoon and ongoing El Nino conditions.
Inflation Projections and Breakdown
Consumer Price Index inflation is projected to reach 5.2 per cent for 2026-27 from 5.0 per cent previously projected.
- Q2 inflation forecast raised to 4.9 per cent from 4.7 per cent.
- Q3 inflation forecast raised to 6.0 per cent from 5.9 per cent.
- Q4 inflation forecast raised to 5.7 per cent from 5.5 per cent.
- Q1 2027-28 inflation projected at 5.6 per cent compared to 5.3 per cent.
- Core inflation projected at 4.4 per cent for 2026-27 as against 4.3 per cent.
CPI inflation increased to 4.8 per cent in August 2026 from 4.5 per cent in July due to higher food and fuel group inflation.
Economic Growth and SME Funding
Real Gross Domestic Product growth for 2026-27 is projected at 7.1 per cent, which is higher compared to 6.7 per cent projected earlier.
- Q2 growth projected at 7.2 per cent from 6.4 per cent earlier.
- Q3 growth projected at 6.9 per cent from 6.5 per cent earlier.
- Q4 growth remaining at 6.8 per cent.
- Q1 2027-28 growth projected at 7.1 per cent, lower compared to 7.3 per cent earlier.
Alongside these monetary actions, economic measures also include the introduction of a new Rs 10,000 crore SME Growth Fund to address financial conditions and support small and medium enterprises.