Mumbai

The Reserve Bank of India (RBI) may lower the benchmark repo rate by a further 25 basis points (bps) in its February 2026 monetary policy meeting, taking it down to 5 per cent, according to a report by Union Bank of India.

The report said there is scope for one final 25 bps rate cut, either in February or April 2026, citing the central bank’s dovish policy guidance and easing inflationary pressures. It noted that the RBI has repeatedly highlighted benign inflation conditions and subdued underlying price pressures in recent policy communications.

According to the report, if the estimated impact of nearly 50 bps inflation attributed to gold prices is adjusted, headline inflation appears even more moderate, strengthening the case for additional monetary easing.

“We see scope for a final 25 bps rate cut in February or April 2026. Given the dovish policy guidance, we cannot rule out the possibility of a final 25 bps rate cut in the February 2026 meeting to a 5.0 per cent repo rate, even as the timing of the final rate cut is usually difficult to call,” the report said.

However, it cautioned that the timing of the last rate cut remains uncertain. One of the key factors influencing the RBI’s decision will be the upcoming revision of the Consumer Price Index (CPI) and Gross Domestic Product (GDP) base years, scheduled for February 2026.

In view of these revisions, the Monetary Policy Committee (MPC) may prefer a wait-and-watch approach to reassess inflation and growth dynamics once the updated data becomes available, the report added.

In its December policy meeting, the MPC had announced a 25 bps cut in the repo rate, bringing it down to 5.25 per cent. RBI Governor Sanjay Malhotra said the decision was unanimous and followed a detailed assessment of evolving macroeconomic conditions and the outlook for growth and inflation.

The three-day MPC meeting was held from December 3 to 5, and the rate cut was implemented with immediate effect.

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The RBI’s next MPC meeting is scheduled for February 4, 5 and 6, 2026. Market participants are expected to closely track the outcome for signals on the timing and extent of any further rate easing, especially in the context of changing inflation trends and the forthcoming data revisions.