RBI Keeps Repo Rate Unchanged at 6.5%: What It Means for Borrowers and the Economy

The Reserve Bank of India (RBI) has maintained the repo rate at 6.5% for the 11th consecutive meeting, signaling a continued pause in rate adjustments amid inflationary pressures and an uncertain economic outlook. The decision was announced on December 6 by RBI Governor Shaktikanta Das after a 4:2 split within the Monetary Policy Committee (MPC). The last rate hike occurred in February 2023.

Implications for Borrowers

The RBI's decision to hold the repo rate steady has significant implications for different types of loans, providing a sense of stability for borrowers:

Home Loans

Interest rates on home loans linked to the repo rate will remain unchanged. Existing borrowers will not see any change in their Equal Monthly Installments (EMIs). 

Auto Loans

Auto loan borrowers with repo rate-linked terms will also experience no changes in their EMIs. Stability in auto loan rates could support consumer confidence in vehicle purchases.

Personal Loans

Borrowers holding personal loans tied to the repo rate can expect their EMIs to remain steady.

New Borrowers

Those planning to take new loans should anticipate interest rates remaining at current levels. The stability in borrowing costs could encourage potential borrowers to proceed with their financial plans.

By maintaining the repo rate, the RBI provides continuity for borrowers, ensuring that neither existing EMIs nor new loan costs face immediate upward pressure.

Why the RBI Kept Rate Unchanged Again

Governor Shaktikanta Das emphasized that the decision to keep rates unchanged stems from continued concerns over inflation, particularly food inflation, which has not yet stabilized. Inflationary pressures remain a key focus area for the central bank.

Despite inflation concerns, there are reasons for cautious optimism about India's economic growth. Governor Das highlighted the potential positive impact of factors like favorable monsoon seasons and increased capital expenditure. These elements are expected to support economic expansion, balancing the risks posed by inflation.