RBI governor Sanjay Malhotra on Friday, 5 June, announced that the monetary policy committee (MPC) has decided to keep the unchanged at 5.25% and maintain the policy stance as “neutral”. The central bank cited heightened inflation risks arising from geopolitical tensions as the primary reason behind the decision, while noting that the Indian economy continues to remain resilient and well-positioned despite global uncertainties.
The Reserve Bank of India’s decision to hold interest rates steady is expected to have a direct bearing on millions of borrowers and depositors. While home loan borrowers with repo-linked loans are unlikely to see any immediate change in their EMIs, investors can expect existing deposit rates to remain stable. Here’s a closer look at what the central bank’s latest policy decision means for your EMIs, FDs and overall financial planning.
What an unchanged repo rate means for your fixed deposits?
The unchanged repo rate is set to support stability in fixed deposit returns. Since banks generally align their deposit rates with changes in repo interest rate, the pause reduces the likelihood of any immediate revisions to FD rates.
“For depositors, today’s policy pause provides a degree of reassurance. The RBI has raised its inflation forecast for FY27 to 5.1% while keeping the repo rate unchanged at 5.25%, suggesting that interest rates may remain elevated for longer than previously expected,” said Adhil Shetty, CEO of BankBazaar, adding that this further reduces the likelihood of any immediate decline in FD rates and supports the current return environment for savers.
At present, select private banks are offering up to 7.35% on specific tenures, while several mid-sized lenders continue to offer rates above 7%. Senior citizens can typically earn an additional 25 to 50 basis points over these rates.
“With inflation projected to rise through the year and peak at 5.9% in the third quarter, preserving real returns remains an important consideration,” Shetty said.
How should FD investors respond to the RBI’s rate pause?
With interest rates remaining unchanged, Shetty has advised fixed deposit investors to focus on spreading their investments rather than trying to predict RBI’s future rate movements. One strategy is to create an FD ladder by spreading investments across different maturities, such as one, two and three years, which helps lock in current interest rates while maintaining liquidity and flexibility.
“In the current environment, the RBI’s message is not that rates are headed sharply lower, but that inflation risks have increased sufficiently to warrant caution. That should encourage savers to review their deposit strategy sooner rather than later,” Shetty noted.
What steady repo rate means for home loan EMIs?
The repo rate hold at 5.25% means no immediate change to EMIs on floating-rate . It also means that borrowers will continue to benefit from the cumulative 125 basis points of rate cuts delivered since early 2025, which have significantly reduced borrowing costs.
According to an illustration shared by Shetty, the cumulative impact of previous rate cuts results in EMI savings of around ₹3,050 per month on a ₹50 lakh home loan with a 20-year tenure and nearly ₹5,800 per month on a ₹75 lakh loan of the same tenure. Those gains remain fully intact following today’s decision of keeping the repo rate unchanged.
“The RBI’s commentary suggests that inflation risks have increased due to higher fuel prices, commodity costs and supply disruptions, but the central bank is not yet prepared to respond with tighter monetary policy. For borrowers, that creates a period of relative stability in lending rates,” he said, adding that the priority now is not waiting for another rate cut but ensuring full transmission of previous cuts.
How should borrowers navigate the current policy environment?
Shetty also said borrowers whose loans are linked to older benchmarks such as the marginal cost of funds-based lending rate (MCLR) may want to assess whether their loans are still competitive, while those paying higher rates than prevailing market levels may benefit from evaluating refinancing options.
In the absence of fresh rate cuts, he advised that directing surplus cash towards principal reduction can often generate greater long-term savings than waiting for incremental changes in policy rates.