RBI Holds Rates as Growth and Inflation Outlook Improves

Compared with its June policy, the RBI today kept the repo rate unchanged at 5.25% and retained its neutral stance, but marginally improved the FY27 macroeconomic outlook.Real GDP growth is now projected at 6.7%, against 6.6% previously, while inflation is estimated at 5.0%, slightly lower than the earlier 5.1% forecast. The revisions suggest confidence that domestic demand and financial conditions can absorb external pressureswithout requiring an immediate policy response. India’s economy remains resilient despite geopolitical tensions, volatile energy prices, supply-chain disruptions and El Niño-related uncertainty. Strong private consumption, continuing investment momentum androbust services activity support the growth outlook, although higher input and logistics costs may weigh on selected sectors. Healthy banking-system liquidity and sustained credit demand should aid transmission, while potential FCNR(B) inflows could strengthenforeign-currency funding and ease pressure on market liquidity. The unchanged rate also gives borrowers and businesses greater near-term certainty. However, the RBI is likely to remain vigilant as crude prices, currency movements, food inflation and globalmonetary tightening could alter the balance of risks.

Overall, the outcome is more optimistic than the previous policy outlook but still cautious: growth expectations have strengthened, inflation concerns have eased modestly,and the central bank has preserved flexibility to respond if conditions change. We, at Namdev Finvest Limited, still maintain a conservative stance amid the hazy outlook due to the dual risks of the West Asia conflict and the effects of El Niño on the Indianeconomy at large.

For the MSME sector, the past two years have been characterised by regulatory tightening and higher risk-weight requirements, which have strengthened underwriting standardsand improved credit discipline across the industry. Asset quality has improved, leverage levels have moderated and credit demand remains healthy. We believe the sector has largely worked through the peak of the stress cycle and is entering a more sustainablegrowth phase, with better credit quality, lower over-leverage and stronger borrower resilience. MSME credit outstanding grew 16% year-on-year to ₹67.6 lakh crore, while GNPAs improved by around a percent over the past year. In this environment, NBFCs withdeep rural and semi-urban presence and strong risk assessment capabilities will be best positioned to support underserved MSMEs and microfinance borrowers while maintaining prudent growth. We expect these markets to remain key drivers of credit demand, supportedby improving asset quality, funding availability and stronger borrower fundamentals.

The stable policy environment also provides greater visibility on funding costs and interest rate expectations, enabling NBFCs to undertake more effective balance sheet planningand prudent liquidity management. Going forward, while global uncertainties will continue to be monitored closely, the current policy stance provides the confidence and stability needed to support responsible credit expansion and sustain India’s long-termgrowth momentum.