The decision comes against the backdrop of a three-month-long crisis in West Asia that has disrupted energy supplies, pushed up crude oil prices and heightened inflationary as well as fiscal risks for import-dependent economies such as India.
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RBI MPC June 2026: What changes after pause on rate cut?
- Home loans linked to the repo rate are unlikely to see an immediate increase in EMIs.
- Car loans and personal loans generally remain at existing rates unless banks revise them independently.
- Business borrowing costs are less likely to rise in the near term.
- Government borrowing costs may remain stable if bond yields do not rise significantly.
- Fixed deposit (FD) rates are likely to remain near current levels rather than rise further.
- Savings account rates are generally unchanged. Increase in limits for NRI and OCI investors to invest in stock market without SEBI registration
The policy decision comes amid a three-month long conflict in West Asia that has disrupted energy supplies, leading to a surge in crude oil prices, and created fiscal and inflationary pressures for import-dependent countries like India.
Read more: RBI MPC highlights: Top decisions announced by Governor Sanjay Malhotra & Co
Announcing the second bi-monthly monetary policy for the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has unanimously decided to retain short-term lending rate or repo rate at 5.25 per cent with a neutral stance.
The interest rate pause comes even as the Consumer Price Index (CPI) based headline retail inflation has moved closer to the RBI’s medium-term target of 4 per cent at 3.48 per cent in April.Moreover, there is fear of inflation further inching up due to expected weak monsoon and fuel price rise in the coming months.
Additionally, the rupee has been depreciating continuously since the beginning of this year. The rupee settled at a record closing low of 96.86 against the USD on May 20, 2026, dropping 33 paise from its previous close.
Once considered among Asia’s more stable currencies, the rupee has now become one of the worst-performing emerging market currencies this year, pressured by a mix of expensive oil, capital outflows, widening trade deficits and a surging US dollar.
It has depreciated about 7 per cent so far in 2026 and is down roughly 6 per cent since the outbreak of the Iran conflict in late February.
Based on the recommendation of the MPC, the RBI reduced the repo rate by 25 bps each in February, April, and December 2025 and 50 basis points in June amidst easing retail inflation.
India’s retail inflation dropped to a historic low of 0.25 per cent in October 2025, marking the lowest level since the CPI series was introduced.