Repo Rate Unchanged at 5.50%: RBI Plays It Safe Amid Festive Season Hopes

From inflation control to US tariff risks, here’s why the RBI kept the repo rate unchanged–and how it could shape your EMIs this festive season.

The Reserve Bank of India’s Monetary Policy Committee (MPC) has kept the repo rate unchanged at 5.50% in its August 2025 meeting, maintaining a neutral stance. This follows aggressive policy easing earlier this year, when the RBI cut rates by a total of 100 basis points between February and June.

For borrowers, depositors, and the banking sector, this decision signals stability rather than inaction. Here’s why the central bank decided to pause, what influenced it, and what it means for you.

Why the Repo Rate Unchanged Decision Was Taken

1. Inflation Has Dropped, But Caution Remains

Retail inflation fell to a six-year low of 2.1% in June 2025, leading the RBI to lower its FY26 inflation forecast from 3.7% to 3.1%. This drop was aided by lower food prices and easing energy costs.

However, the MPC remains cautious. Rising global gold prices could stoke domestic inflation, given India’s high gold import demand. Maintaining the repo rate unchanged gives the RBI flexibility to act if inflation starts climbing again.

2. Global Trade and US Tariff Concerns

The trade outlook is unsettled. The US has proposed a 25% tariff on certain Indian exports, a move that could dent trade revenues, weaken the rupee, and import inflation.

Leaving the repo rate unchanged preserves the RBI’s policy space, enabling future cuts if tariffs slow growth or disrupt export-led sectors.

3. GDP Growth Forecast Is Strong

Despite global challenges, the RBI retained its FY26 GDP growth forecast at 6.5%, with quarterly estimates of:

• Q1: 6.5%
• Q2: 6.7%
• Q3: 6.6%
• Q4: 6.3%

This solid growth outlook reduces the need for immediate rate cuts. The economy appears capable of sustaining momentum without additional monetary stimulus.

4. Protecting Bank Margins

The lowest home loan rate in the market stands at 7.35%, nearly matching the highest FD rate of 7.4%. This leaves banks with razor-thin margins.

Cutting the repo rate further would push lending rates lower, making it harder for banks to maintain profitability and absorb risk.

5. FD Rates Cannot Be Cut Much More

Deposit rates have already fallen over the past year, and banks have little scope to lower them further without discouraging savings.

Stable FD rates ensure steady deposit inflows, which are essential for maintaining lending capacity. A further rate cut now could hurt savers and slow capital mobilisation.

6. Previous Cuts Still Working Through the Economy

From February to June 2025, the RBI slashed the repo rate by 100 basis points. Monetary policy changes take time to ripple through lending rates, credit availability, and spending.

A pause allows the RBI to gauge the full effect before making new moves.

7. Geopolitical Tensions and Commodity Prices

Uncertainty in oil markets, currency volatility, and rising gold prices driven by global tensions– pose inflation risks.

Keeping the repo rate unchanged ensures the RBI retains room to respond quickly if external shocks threaten domestic stability.

Impacts of the Decision

For Borrowers

• No immediate EMI reduction for home, personal, or car loans.
• Lending rates remain low historically, making it a good time to take new loans. (See our Home Loan Guide for the latest offers.)

For Depositors

• FD and savings rates remain steady.
• Stable returns ensure savings remain attractive despite low inflation.

For Banks

• Protects net interest margins.
• Supports healthy deposit growth without forcing rate cuts.

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Looking Ahead

The RBI will watch:

• Inflation trends versus the 4% target.
• The outcome of US tariff proposals.
• Global commodity price volatility.
• The effect of September’s CRR cut on liquidity.

If inflation remains low and global risks subside, a rate cut in FY26 is possible. For now, the repo rate unchanged stance ensures stability during global uncertainty.

Loan Bazaar’s View

From our perspective at Loan Bazaar, the RBI’s decision to keep the repo rate unchanged is a measured, strategic move. It safeguards the economy from global shocks, gives earlier rate cuts time to work, and supports both borrowers and savers in different ways.

With the festival season ahead, banks expect an uptick in retail goods purchases and real estate demand. Even without a rate cut, lenders are likely to push festive offers such as waived processing fees and special loan packages–to boost consumer sentiment and spending.

Borrowers benefit from low lending rates, while depositors enjoy steady returns. Banks gain stability to keep credit flowing without sacrificing profitability.

This pause is not a sign of inaction it’s a signal that the RBI is playing the long game, balancing growth and stability in a volatile global economy.