RBI pauses rate cuts: What it means for borrowers, savers
What's the story
The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25% for the second consecutive policy meeting. The decision comes as policymakers assess the impact of rising energy prices and supply chain disruptions caused by the ongoing West Asia conflict. The move is expected to have implications on home loans, business borrowing costs, and fixed deposit rates.
Loan implications
Impact on loans and government borrowing costs
The RBI's decision to maintain the repo rate is likely to keep home loan EMIs stable for now. Car and personal loans are also expected to remain at current rates unless banks decide otherwise. Business borrowing costs are less likely to increase in the near term, while government borrowing costs may stay stable if bond yields don't rise significantly.
Deposit stability
FD rates likely to remain stable
The RBI's decision is also likely to keep fixed deposit (FD) rates stable near current levels. Savings account rates are generally unchanged. The policy decision comes amid a three-month-long conflict in West Asia that has disrupted energy supplies, pushed up crude oil prices, and heightened inflationary as well as fiscal risks for import-dependent economies such as India.
Economic challenges
Concerns over inflation and depreciating rupee
The RBI's decision comes even as the Consumer Price Index (CPI)-based headline retail inflation has moved closer to the medium-term target of 4% at 3.48% in April. However, fears of inflation rising further due to a weak monsoon and fuel price hikes in the coming months remain. The rupee has also been continuously depreciating since the start of this year, settling at a record closing low against the US dollar on May 20, 2026.