Why did RBI keep repo rate unchanged at 5.25%? Know these 5 reasons

No change in the repo rate this time, but the move is far from random. The RBI has carefully weighed multiple factors before deciding to hold at 5.25%. Here are five reasons behind the decision.

In Short

• RBI keeps repo rate steady at 5.25% amid global uncertainties
• Decision reflects cautious, data-driven approach to balance growth and inflation
• Stable rates offer relief to borrowers, supporting housing demand and credit growth

The Reserve Bank of India (RBI) has decided to keep the repo rate unchanged at 5.25%, and the move hasn’t come as a surprise. At a time when global risks are rising and inflation concerns haven’t fully faded, the central bank appears to be playing it safe while keeping growth in focus.

A CAUTIOUS MOVE AMID GLOBAL UNCERTAINTY

The global backdrop remains uncertain, with geopolitical tensions, especially in West Asia, adding pressure on oil prices and inflation. Instead of rushing into a rate change, the RBI has chosen to wait and watch.

Vinod Francis, SGM and Chief Financial Officer at South Indian Bank, summed it up well. He said the decision reflects a “calibrated and data-led approach” at a time when global uncertainty is high. According to him, while India’s growth remains steady, risks to inflation, especially from commodities, cannot be ignored. The decision to hold rates, therefore, helps maintain stability in the financial system.

BALANCING GROWTH AND INFLATION

The RBI’s job is to strike a balance, i.e., support economic growth while keeping inflation under control. Right now, both factors seem reasonably aligned, giving the central bank room to pause.

Arun Poddar, CEO of Choice International Limited, pointed out that India’s growth outlook remains strong, with GDP expected to grow between 6.7% and 6.9%, while inflation is relatively stable. He believes the RBI’s approach offers confidence to investors and ensures stability in capital markets, which is crucial in uncertain times.

RELIEF AND STABILITY FOR BORROWERS

For borrowers, especially those with home loans, the decision brings a sense of relief. With no change in the repo rate, lending rates are expected to remain stable for now, which means EMIs are unlikely to rise in the near term.

Rajesh Sharma, Managing Director at Capri Global Capital Limited, said the move provides “stability and predictability” for borrowers. He added that steady EMIs could help sustain housing demand and support overall credit growth in the economy.

STRONG FUNDAMENTALS, BUT RISKS REMAIN

India’s economic fundamentals continue to hold up well, but the RBI is clearly not ignoring the risks. Rising energy prices, supply chain disruptions and global tensions still pose challenges.

Lata Pillai, Senior Managing Director at JLL India, noted that while the country remains on a strong footing, external risks have increased. She highlighted that inflation is currently under control, giving the RBI some breathing space, but uncertainties around crude oil and global growth still need careful monitoring.

A ‘WAIT-AND-WATCH’ APPROACH

By holding rates steady, the RBI is signalling that it is not in a hurry. The central bank wants clearer signals on inflation and global conditions before making its next move.

For now, the focus remains on maintaining stability—keeping borrowing costs predictable, supporting consumption, and ensuring that growth stays on track despite global headwinds.

- Ends