Repo rate unchanged at 5.25%, loans stay affordable as RBI pauses after cumulative 1.25% cuts in 2025
Winning Bizness Desk
Mumbai. The Reserve Bank of India has decided to keep the repo rate unchanged at 5.25%, signalling relief for borrowers as loan interest rates and EMIs are unlikely to rise in the near term. RBI Governor Sanjay Malhotra announced the decision after the Monetary Policy Committee meeting that began on February 4 and concluded on February 6. This is the first pause after a series of rate cuts carried out through 2025, aimed at supporting growth while keeping inflation under control.
Policy decision and rate pause explained
The governor said the MPC unanimously decided to maintain the repo rate at 5.25%, citing stable inflation trends and manageable economic risks. The repo rate is the interest rate at which RBI lends money to banks. When it remains low, banks get cheaper funds and usually pass on the benefit to customers through lower lending rates. RBI had last reduced the repo rate by 0.25% in December, bringing it down to the current level.
Rate cuts carried out through 2025 The current repo rate is the result of four reductions made during 2025, totalling 1.25 percentage points after nearly five years of status quo.
Key milestones in rate cuts included:
These cuts were aimed at boosting borrowing, consumption and investment during a phase of economic moderation.
Relief for customers hit by digital fraud
Among major non-rate announcements, RBI proposed a new framework to compensate customers affected by small-value digital frauds. Under the proposal, victims of such frauds may receive compensation of up to ₹25,000. Governor Malhotra said RBI will soon release a discussion paper focused on strengthening digital payment security.
Proposed safety measures include:
The move comes amid rising complaints of online payment fraud across platforms.
GDP and inflation outlook revised RBI also revised its macroeconomic projections. While the central bank said inflation remains largely under control, it marginally raised the retail inflation forecast for the financial year 2025-26 from 2% to 2.1%. According to the governor, short-term price pressures may appear, but overall inflation is expected to stay within RBI’s tolerance band of 2% to 6%.
Malhotra noted that: • Inflation pressure is currently low • Gold and silver prices show volatility due to global trends • Prices of most essential items remain stableRBI will present a full-year inflation outlook in its April policy statement, supported by expanded data under a new statistical series.
How repo rate impacts loans and economy RBI’s monetary policy meetings are held every two months and the MPC consists of six members, three from RBI and three appointed by the central government. In 2025-26, the committee held six meetings, with the first taking place from April 7 to 9.
The repo rate is a key tool used by central banks to manage inflation and growth. When inflation rises sharply, rates are increased to reduce money flow. When the economy slows, rates are cut to encourage lending and spending.
In simple terms:
- Lower repo rate means cheaper bank loans
- Cheaper loans boost demand and investment
- Higher rates reduce spending to curb inflation
With the current pause, RBI has signalled confidence that economic conditions remain stable, while leaving room for future action if required.
