RBI MPC minutes reveal 2 members opposed shift from neutral stance to calibrated tightening in October meeting

The Reserve Bank of India's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% at its October meeting, the first such increase in almost three years. All six members backed the rate hike. However, the minutes released on Wednesday show a split on the accompanying stance. Four members supported moving the stance from neutral to calibrated tightening, while two, Nagesh Kumar and Ram Singh, preferred retaining a neutral stance.

Governor Sanjay Malhotra, who voted for both the hike and the stance change, pointed to mounting price pressures. He said headline CPI is expected to reach the upper tolerance band in the third quarter and stay well above 5% in the next two quarters, with underlying inflation also likely to exceed the target. Kumar cited continuing geopolitical and trade policy uncertainty as grounds for staying neutral. Singh warned that a tightening signal could imply a longer rate hike cycle and dampen demand in rate-sensitive sectors and private investment.

Why it matters for business

The cost of borrowing is set to rise for companies and consumers alike. Firms with floating-rate loans, working capital facilities or planned capital expenditure will feel the impact as lending rates adjust. Singh's concern about interest-rate-sensitive sectors points to possible pressure on demand in segments such as housing, auto and durable goods, which could affect order books and inventory planning for suppliers.

The committee's language also narrows the near-term path. Its minutes indicate that rate cuts are not on the table for now, and the only options ahead are a hike or a pause, depending on incoming data. For treasury and finance teams, that means funding plans should account for a period of elevated rates rather than an early reversal.

The RBI revised its FY2027 CPI inflation forecast to 5.2% from 5% in August, and raised its GDP growth projection to 7.1% from 6.7%. Inflation is seen at 6% in the third quarter before eas…