RBI Keeps Repo Rate Unchanged at 5.25%, Raises FY27 Growth Forecast to 6.7%

The Reserve Bank of India maintained the repo rate at 5.25% in its August monetary policy review, marking the fourth consecutive policy meeting without a rate change. The six-member Monetary Policy Committee unanimously voted for the status quo and retained its neutral policy stance, broadly in line with market expectations. The RBI had reduced the repo rate by a cumulative 125 basis points during 2025, with the last 25-basis-point cut in December 2025.

Governor Sanjay Malhotra said the central bank needs greater clarity on the path and composition of inflation before taking further policy action. While some economists interpreted the policy as relatively dovish, the Governor maintained that the stance was neither dovish nor hawkish and was appropriate for the prevailing growth-inflation environment.

What is Repo Rate?

RBI Raises FY27 GDP Growth Forecast

The central bank upgraded its FY27 real GDP growth forecast to 6.7% from 6.6% projected in the June review, reflecting increased confidence in domestic economic momentum. Resilient services activity, improving employment conditions, GST-related support and stronger urban demand are expected to aid growth. Robust credit expansion and infrastructure activity are also providing support to the economy.

However, global geopolitical uncertainty, crude oil volatility and an unpredictable monsoon remain key risks to the outlook. The RBI, therefore, continues to favour a flexible, data-dependent approach rather than providing specific guidance on the timing of the next interest-rate move.

What happened at the latest MPC ?

How RBI Repo Rate Changes Impact FDs, Home Loans, and EMIs

The repo rate is the rate at which the RBI lends to commercial banks — directly shapes your FD returns and loan EMIs.

Fixed Deposits: When the RBI hikes the repo rate, banks raise FD rates to attract deposits, benefiting savers. A rate cut has the opposite effect, lowering FD rates on new deposits. Existing FDs stay unaffected since rates are locked in at booking.

Home Loans: Most home loans are linked to the repo rate via RLLR (Repo Linked Lending Rate), so changes pass through quickly. A rate hike raises your loan's interest rate, while a cut lowers it. Older MCLR-linked loans see a slower, delayed transmission.

EMIs: For floating-rate loans, banks typically adjust either your tenure or EMI amount when the repo rate changes. Most extend or shorten the tenure first, keeping EMI unchanged — only revising the EMI itself once tenure hits its limit.

Inflation Forecast Cut to 5%

The RBI lowered its FY27 retail inflation projection to 5% from 5.1% estimated in June. Core inflation is projected at around 4.3%. While higher fuel prices have pushed headline inflation upwards, the central bank believes broader underlying price pressures remain relatively contained. Inflation is also expected to remain within the RBI’s 2%-6% tolerance band.

The RBI nevertheless remains watchful, as renewed pressure from energy prices, food inflation or geopolitical disruptions could alter the interest-rate trajectory later in the financial year.

RBI Plans Polymer Currency Note Trials

Another major announcement was the planned introduction of polymer currency notes on a trial basis from the next financial year. The government has approved field trials involving 2 billion notes, comprising 1 billion ₹10 notes and 1 billion ₹20 notes. Polymer notes are more durable and resistant to wear and counterfeiting compared with conventional notes. A wider rollout will depend on the results of these trials.

No Clear Answer Yet on Tata Sons Listing

The RBI also indicated that an updated list of Upper Layer NBFCs will be released shortly under its revised principle-based regulatory framework. However, the Governor did not provide definitive clarity on Tata Sons’ classification or its consequent listing requirement. Until a revised list is issued, uncertainty over the Tata Sons listing continues.