Winning Bizness Desk
Mumbai.The Reserve Bank of India has kept the repo rate unchanged at 5.25 percent in its first monetary policy meeting of the new financial year, ensuring that loan costs and EMIs remain stable for borrowers. RBI Governor Sanjay Malhotra announced the Monetary Policy Committee’s decision on April 8, signalling a cautious approach amid global and domestic uncertainties. This marks the second consecutive policy where rates have been held steady, following a similar decision in February.
Rates unchanged amid global uncertainties concerns
The central bank’s decision comes against the backdrop of volatile global conditions and lingering inflation risks. The RBI has opted for a wait-and-watch stance, choosing not to rush into further rate changes. The governor indicated that inflationary pressures, especially from food prices, remain a concern due to erratic weather patterns and unseasonal rains. Additionally, geopolitical tensions such as the Iran-Israel conflict are disrupting supply chains and adding to uncertainty in global markets.
Four rate cuts bring relief in 2025
The current repo rate of 5.25 percent follows a series of four rate cuts during 2025, totalling a reduction of 1.25 percentage points over the year. These cuts were aimed at supporting economic growth while keeping inflation in check.
Key timeline of rate cuts in 2025:
- February: Rate reduced from 6.5 percent to 6.25 percent after nearly five years
- April: Another cut of 0.25 percent announced
- June: Sharp reduction of 0.50 percent implemented
- December: Final 0.25 percent cut brought rate to 5.25 percent
Why RBI holds rates steady now
The RBI has refrained from further easing due to multiple risks that could push inflation upward. Rising prices of fruits, vegetables and grains remain a concern, while global energy prices are also under pressure. The governor highlighted that uncertainties arising from geopolitical conflicts are affecting economic outlook and growth projections. The central bank is closely monitoring developments before making any decisive moves on interest rates.
Governor flags economic challenges ahead
According to the RBI Governor, India’s macroeconomic fundamentals remain strong, but external risks cannot be ignored. He pointed out that rising oil and gas prices could impact global growth, while ongoing conflicts are adding to unpredictability in financial markets. The central bank is therefore balancing growth needs with inflation control, ensuring stability in the financial system.
How repo rate impacts loans and economy
The repo rate is the interest rate at which the RBI lends money to commercial banks. A lower repo rate reduces borrowing costs for banks, which in turn can pass on the benefit to customers through cheaper loans. Conversely, higher rates make borrowing expensive and reduce liquidity in the system.
Key takeaways for borrowers and economy:
- No change in EMIs for home, auto and personal loans
- Stable borrowing costs expected in near term
- Inflation remains key factor for future decisions
- RBI continues cautious approach amid global volatility
Policy framework and meeting schedule details
The Monetary Policy Committee consists of six members, including three from the RBI and three appointed by the central government. The committee meets every two months to review economic conditions and decide on policy rates. For the financial year 2026-27, six meetings are scheduled, with the first held between April 6 and 8. The RBI’s policy decisions will continue to depend on inflation trends, growth outlook and evolving global developments.
