RBI boosts M&As, neighbourhood trade

THE Reserve Bank of India’s latest monetary policy is more than just a statement on interest rates; it is a nudge towards deeper regional finance. By allowing banks to fund mergers and acquisitions (M&As) and to lend in rupees to residents of neighbouring countries, the RBI is taking a quiet but significant step towards financial deepening and regional integration. For businesses hungry for capital and for India’s broader economic ambitions, these reforms are as consequential as the repo rate itself. Easing access to financing for corporate consolidation and cross-border trade signals a maturing financial system and a more connected regional economy.

Against this backdrop, the RBI has once again opted for continuity over change, keeping the repo rate steady at 5.5 per cent and maintaining a “neutral” stance. At a time when markets speculated over a potential rate cut to boost demand, the central bank has chosen caution, signalling that stability cannot be sacrificed for short-term cheer. Inflationary pressures have eased, with projections revised down to 2.6 per cent, while India’s GDP growth outlook has been upgraded to 6.8 per cent for 2025-26. With this, the RBI retains flexibility to respond to global shocks — from US tariffs and oil price swings to potential capital outflows.

Yet risks remain. Rural consumption remains patchy despite a good monsoon and uneven rainfall could temper demand. Globally, rising protectionism and monetary tightening abroad may unsettle capital flows. The RBI’s ‘wait-and-watch’ stance reflects. In effect, the central bank is betting on India’s resilience. This is monetary prudence in action: neither too tight to stifle growth nor too loose to fuel instability. With growth on track, inflation under control and financial reforms shaping the economy’s future, the RBI has signalled a strategy that is prepared for the storms that may lie ahead.