RBI keeps key rate unchanged at 5.25%, EMIs to remain same

The Reserve Bank of India (RBI) kept its benchmark interest rate unchanged at 5.25 per cent on Friday as inflation remained at manageable levels, and growth concerns eased following trade agreements with the US and the European Union.

The decision means there will be no immediate change in EMIs or lending rates for home loan borrowers. Cumulative repo rate cuts of 125 basis points since February 2025 have already benefited borrowers in the form of lower EMIs.

The RBI's six-member Monetary Policy Committee (MPC) voted unanimously to keep the repo rate at 5.25 per cent. The RBI retained its neutral policy stance, signalling rates will stay low for some time.

US President Donald Trump earlier this week announced a cut in tariffs on Indian goods to 18 per cent from 50 per cent, easing a key pressure point on India's economy and markets.

Announcing the decisions of the MPC, RBI Governor Sanjay Malhotra said external headwinds had intensified, but the successful completion of the trade deal with the US augured well for the economy.

"Amidst heightened geopolitical tensions and elevated uncertainty, the Indian economy is in a good spot with strong growth and low inflation. Inflation remains below the tolerance band, and its outlook continues to be benign," Malhotra said.

"Inflation, especially underlying inflation, is low. It's much lower than even our forecast...underlying inflation is very, very benign. So, I expect policy rates should remain at low levels for a long time," he said.

Malhotra said no assessment had been done on how much the US trade deal would contribute to the GDP growth because details were not available. "We have added 20 basis points to GDP growth because of various reasons, including the US trade deal," he said.

Consumer price inflation is projected at 2.1 per cent for the current financial year, marginally higher than the earlier estimate of 2 per cent, but below RBI's target of 4 per cent. Inflation in Q4 FY26 is expected to remain above 3 per cent, while CPI in H1 FY27 is estimated to stay above the 4 per cent mark.

The central bank revised its GDP growth estimate for the current FY26 upward to 7.4 per cent from the earlier projection of 7.3 per cent.

For the first half of FY27 (April 2026 to March 2027 fiscal), growth is now projected at 6.95 per cent, higher than the previous estimate of 6.75 per cent. However, the RBI refrained from providing a full-year FY27 projection, stating that it would await the release of the revised GDP base series before making comprehensive growth assessments. -- PTI