Repo rate : Repo rate unchanged, RBI's big decision, no relief for borrowers

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The Reserve Bank of India (RBI) has decided not to make any changes to the repo rate in the monetary policy review announced today. After the meeting of the six-member Monetary Policy Committee (MPC) chaired by Governor Sanjay Malhotra, the repo rate has been kept at 5.25 percent. Due to this decision, the immediate reduction in EMIs of home loans, vehicle loans, and other retail loans is currently unlikely.

While announcing the policy, Governor Malhotra expressed concerns about the global economic situation. He clarified that since the last meeting, global uncertainty has increased, with geopolitical tensions, international trade policies, and interest rate decisions in major economies affecting emerging countries, including India. However, he also noted that recent international trade agreements and improvements in India's export sector are providing positive indications about the country's economic future.

According to the RBI, inflation is under control at the domestic level and economic growth is satisfactory. Prices of food grains, fuel rates, and inflation in the service sector are relatively stable, and it is expected to remain under control in the coming quarters. Therefore, the RBI has clarified that the committee has adopted a 'watch and wait' cautious approach regarding interest rates.

The RBI has also revised the economic growth forecast. The GDP growth for the first quarter of the upcoming financial year is expected to be 6.9 percent, while for the second quarter, it is expected to reach 7 percent. This will make India one of the fastest-growing economies in the world, the bank expressed confidence. Additionally, the inflation forecast for the financial year 2025-26 has been slightly increased from 2 percent to 2.1 percent.

In terms of policy rates, with the repo rate remaining unchanged, the Standing Deposit Facility (SDF) rate is at 5 percent, while the Marginal Standing Facility (MSF) rate and the bank rate are kept steady at 5.5 percent. This decision appears to be the RBI's attempt to maintain control over liquidity and credit supply in the banking system.

Globally, the policies of central banks in various countries seem to be taking different directions. The Federal Reserve of the United States and the Bank of England have kept interest rates unchanged in recent meetings. However, the Reserve Bank of Australia surprised the market by raising interest rates for the first time in nearly two years. Against this backdrop, the RBI is considered to have adopted a cautious policy without making any hasty decisions.

Governor Malhotra clarified that in the future, RBI's decisions will be made considering economic data, the state of inflation, and macroeconomic developments. He reiterated that while promoting economic growth, maintaining price stability will remain the bank's main objective. In the previous meeting, the RBI had reduced the repo rate by 25 basis points to bring it to 5.25 percent. Although a total of 125 basis points have been cut in the calendar year 2025 so far, borrowers will have to wait a little longer as the rate has been kept unchanged this time.