RBI Monetary Policy - Repo Rate Remains Unchanged at 5.5%

If you’re someone repaying a loan or planning to invest, this update from the RBI is worth your attention. As of October 2025, as per the RBI’s monetary policy, the repo rate remains unchanged at 5.50%. The MPC (Monetary Policy Committee) did a detailed assessment of all the macroeconomic conditions, such as the projected inflation rate and other factors. They decided to have a neutral stance and voted unanimously to keep the repo rate as it is.

If you are wondering how it impacts you, then the repo rate can impact your bank’s loan interest rates. Wondering how? Let’s understand more about it.

• What is Repo Rate? Why is it Important?
• Highlights of the October 2025 MPC’s Decision of Unchanged Repo Rate
• Impacts of Keeping Repo Rate Unchanged
• Risks and Challenges Ahead

What is Repo Rate? Why is it Important?

The ‘repo rate’ refers to the ‘repurchase rate’ at which the commercial banks take short-term funds from the RBI (Reserve Bank of India) by selling their government securities and promising to repurchase them. It is important because it is one of the primary tools for managing monetary policy and liquidity.

When the repo rate increases, banks face a higher borrowing cost. They pay more for lending from the RBI. When banks have to pay more, they typically cover these costs by increasing their fees for customers. Hence, the interest rates on loans and credit go up while the rates on bank deposits are lowered.

Likewise, the decrease in the repo rate means lower interest rates on home loans, business credit, and other loans. The RBI may raise the repo rate when inflation starts to peak. It may lower the rates to stimulate growth and money flow. This is how it exercises its monetary control.
Moreover, operating the repo rates injects liquidity into the system, where banks can meet their short-term funding needs.

Highlights of the October 2025 MPC’s Decision of Unchanged Repo Rate

The 57th Monetary Policy Committee (MPC) meeting was held from 29th September to 1st October 2025. After the 3-day meeting, the results were announced by the RBI’s governor, Sanjay Malhotra. Here are the RBI’s key decisions -

• The repo rate remains unchanged at 5.5%, and the Reserve Bank of India has adopted a neutral stance.
• As a consequence, the standing deposit facility (SDF) rate remains at 5.25% while the marginal standing facility (MSF) rate and the Bank Rate remain at 5.75%.
• The RBI Governor said that the MPC concluded that inflation has shown significant moderation.
• According to the MPC observation, growth may decelerate due to prevailing global uncertainties and tariff-related developments.
• At the same time, the inflation outlook is revised, considering the above-average monsoon.

Impacts of Keeping Repo Rate Unchanged

Every move (and even a no-move) by the RBI impacts its citizens. Being the central bank and an apex body, every decision has an impact on the monetary policies. Let’s understand the impact of the unchanged repo rate from the latest RBI monetary policy.

1. On Borrowers and Loans - For borrowers, there is no relief but also no burden. If you have a floating-rate home or personal loans linked to repo/MCLR, you will likely see no immediate change. You will continue paying the same EMIs as before.
2. On Savers and Deposits - As the repo rate remains unchanged, not only will the interest rates on bank loans remain the same, but banks will also not rush to cut deposit rates, maintaining attractiveness for savers.
3. On Corporate Borrowing & Investment - Even corporate borrowers will have a stable interest rate, which is neither burdensome nor favourable. Interest rate cuts boost corporate lending when new projects pick up. As of now, they may be put on hold, anticipating future rate cuts. The repo rate changes heavily impact the moderate cost of capital as well as investment decisions.
4. On Markets & Capital Flows - Market sentiments depend on the RBI’s move. As of now, the bond yields and the capital flows will remain steady. But the shift in global interest rate dynamics may improve or hamper the foreign capital funding or investment.

Risks and Challenges Ahead

Future market sentiments cannot be guaranteed, but are anticipated depending on the prevailing pattern. Depending on the current observations by the MPC and market conditions, here are certain challenges and risks that lie ahead.

1. Inflation Risks - According to the MPC, inflation had a benign outlook with a decline in food prices and others. However, with ongoing wars, tariffs, and global uncertainties, if there is any unexpected rise in food, fuel, or import prices, then it could push inflation above comfort levels, forcing the RBI’s hand.
2. Currency Volatility - Rupee depreciation will only lead to making the imports costlier and inflated, when the RBI will have to intervene.
3. Global Economic Slowdown - When there is a global slowdown and major economies weaken, the demand for India’s exports may decline. This will also dent the growth of Indian exports.
4. Holding Benefit Transmission - Even if the RBI cuts the repo rate later, the banks may delay passing the benefits of lowered loan interest rates and higher deposit rates to borrowers due to their own cost pressures.

Summing Up

The latest move by the MPC and the RBI is an example of a wait-and-watch move. As the trade-related uncertainties still unfold, especially the tariffs, they want to take time to get clarity on the impact of these policy actions. Once they get the clarity and can determine the outcome, they can come up with a new course of action.  The unchanged repo rate is to balance prudence with ambition.

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