RBI Likely to Hold Short-Term Lending Rate, Say Experts

No Major Changes in Loan Rates Expected as RBI Hits Pause

If you're hoping for cheaper loans soon, you might have to wait a bit longer. The Reserve Bank of India (RBI), after cutting interest rates three times already this year, is now expected to keep its main lending rate, the repo rate, steady at 5.50% in its upcoming policy meeting on August 6.

This pause comes after months of aggressive rate cuts aimed at increasing the economy. In June, the RBI’s Monetary Policy Committee (MPC) surprised markets by slashing the repo rate by 50 basis points, double what most experts predicted. This brought the total rate cut in 2025 to a full 100 basis points, and the RBI shifted its policy stance to "neutral", signalling a change in strategy.

Why a Pause Now?

The repo rate, the rate at which RBI lends to banks is one of the main tools to control inflation and money flow. Here's how it's changed this year:

A poll conducted by Reuters had found that 53 out of 61 economists expected only a 25-bps cut.

Here is how the rate adjustments have looked this year:
 

With a total reduction of 100 basis points in just six months, many economists believe the RBI may take a break to assess the impact of the easing on inflation and growth.

Read More – RBI's Latest Policy Update: How It Affects Your Loan EMIs & Credit Card Bills

Lower Inflation Gives the RBI Some Breathing Space

Prices are finally cooling down, and that is giving the Reserve Bank of India (RBI) some much-needed flexibility. After being a major concern for most of last year, consumer inflation has steadily dropped in recent months. 

According to official data, the Consumer Price Index (CPI) stood at just 2.10 percent in June 2025. This is well below the RBI’s medium-term target of 4 percent, and suggests that price pressures are no longer a serious threat, at least for now.

In its latest update in June, the RBI also revised its full-year inflation forecast for 2025–26. The new estimate is 3.70 percent, slightly lower than its earlier prediction of 4.00 percent. This change shows that the RBI feels more confident about keeping inflation under control in the months ahead.

Here are the latest official inflation projections:
 

Although these numbers look positive, experts are still being cautious. They point out that inflation could pick up again later this year due to global uncertainties and a possible rise in food prices during the upcoming festive season. So, while the trend looks good, it may not stay this way for long.

Growth Concerns Still on the Table

Even though inflation is easing, the economy is not entirely in the clear. The RBI has kept its growth forecast unchanged at 6.5 percent for the current financial year (2025–26). However, many economists are concerned about certain risks that could slow things down.

One of the biggest issues is weak global demand, which affects Indian exports. On top of that, the United States has recently imposed a 25 percent tariff on some Indian goods. This move could hurt export-driven industries such as textiles and chemicals, leading to job losses and lower profits.

Also Read - How Much EMI Will You Save After RBI Repo Rate Cut in February 2025?

So far, the RBI has not changed its growth estimates. But if these trade-related issues continue to grow, the central bank may need to take another look at its projections in the coming months.

Here are the current growth-related projections and expectations:
 

If inflation continues to stay low and economic growth begins to slow down, the RBI might consider a small rate cut later in the year. But for
now, most signs point to the central bank keeping interest rates unchanged as it waits to see how the situation unfolds.

Conclusion 

For now, borrowers should not expect a reduction in their loan interest rates in the near term. Most banks had already passed on the benefits of earlier cuts. New borrowers may still enjoy relatively lower rates, but those waiting for further relief may need to wait longer.

On the banking side, lower rates typically reduce lending margins, especially for non-banking financial companies (NBFCs). While rate cuts help NBFCs access cheaper funds, competition in the lending market has kept their margins in check.

The RBI’s next monetary policy committee meeting is scheduled for August 6 2025, and the outcome is expected to be officially announced the same day.

Until then, analysts, markets, and policy observers will be watching every macro indicator and global development for signs of what the central bank might do next.

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