RBI Holds Repo Rate at 5.50%; Stability Supports Favorable Home Loan Conditions

The Reserve Bank of India (RBI) has opted to maintain its repo rate at 5.50% during the Monetary Policy Committee (MPC) meeting held on August 6, 2025, aligning with expectations despite mounting external risks. The decision follows cumulative rate cuts totaling 100 basis points earlier this year, including a 50‑bps cut in June, as inflation cooled and liquidity improved.

The RBI also reaffirmed its neutral policy stance, signaling a measured approach as domestic growth remains resilient and inflation stays subdued at around 2.1% in June.

RBI Governor Sanjay Malhotra emphasized uncertainty on the external front, especially concerning fresh tariff threats from US President Donald Trump. The rupee depreciated by nearly 16 paise, responding to the escalation of trade rhetoric.

Despite these headwinds, the MPC reaffirmed its GDP growth forecast of 6.5% for fiscal 2025–26, with sector-wise forecasts at 6.5% (Q1), 6.7% (Q2), 6.6% (Q3), and 6.3% (Q4). Governor Malhotra noted that projecting the impact of US tariffs is challenging and said the RBI will continue to close monitoring of incoming data before making further policy moves.

What it Means for Homebuyers

1. Homebuyers & Borrowers: No immediate drop in EMIs, since the repo rate stays unchanged. Banks may adjust lending rates slowly based on future cuts and internal transmission.
2. Potential Future Rate Cuts: While inflation is under control, global uncertainties—especially rising trade tensions with the US—may limit further aggressive easing. Experts suggest any future cuts will depend on clearer data trends.
3. Housing Market & Loans: Sentiment may remain cautious, but liquidity remains favorable. Developers may continue offering flexible schemes to support buyers as demand picks up ahead of the festive season.
4. Economic Outlook: The RBI continues to support a growth projection of 6.5%, but analysts warn that if tariffs stay in place, growth could be trimmed by 30–40 bps.

This policy outcome reflects a deliberate pause by the RBI—balancing supportive domestic conditions with global trade risks, particularly the threat of escalating US tariffs on Indian exports.