No rate cut: RBI holds repo at 5.50% as global risks ease

New Delhi: The Reserve Bank of India’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, has opted to maintain the repo rate at 5.50% following its three-day meeting that ended on 6 August.

The Reserve Bank of India (RBI) on Tuesday kept the repo rate unchanged at 5.50% following its three-day monetary policy meeting. The decision reflects the central bank’s strategy to strike a balance between promoting economic growth and maintaining inflation control.

Addressing the press, Malhotra noted that “geopolitical uncertainty has somewhat abated,” which contributed to the decision to hold the key rate. The committee, comprising three RBI officials and three government-nominated members, meets bimonthly to steer India’s monetary direction. The central bank maintained its neutral stance, with Malhotra stating, “the current macroeconomic conditions, outlook, and uncertainties call for continuation of the existing policy.”

This meeting gained added significance amid escalating global tensions — particularly the imposition of 25% tariffs by the US on Indian imports — and the upcoming festive season. Despite earlier market speculation of a 25 basis points cut, the central bank opted for a pause. The repo rate, already reduced by 100 basis points in 2025, is considered adequately accommodative for now.

Why this meeting matters

The repo rate determines the cost at which the RBI lends money to commercial banks. It directly influences loan interest rates for individuals and businesses. A cut would have lowered borrowing costs, encouraging spending. However, maintaining the rate helps control inflation, which stood at 2.1% in June — below the RBI's 4% target.

Why no rate cut now?

• Inflation is low but stable.
• Repo rate already cut by 100 basis points this year.
• Global economic volatility calls for a cautious stance.

What experts say:

• An Economic Times poll showed 12 of 16 economists expected no rate change.
• SBI had projected a 25 bps cut to spur festive credit demand.
• ICRA saw limited room for further easing.

With the festive season approaching and consumer credit set to rise, the central bank’s decision aims to preserve macroeconomic stability while leaving the door open for future policy adjustments.

The announcement was live-streamed on the Reserve Bank of India’s official YouTube channel and social media platforms. A follow-up press conference provided further policy context.