The Reserve Bank of India’s Monetary Policy Committee (MPC) began its three-day meeting on Wednesday, with market participants closely monitoring the outcome for indications on interest rates and borrowing costs in the coming months.
RBI Governor Sanjay Malhotra will announce the committee’s decisions on June 5, 2026. According to market experts, the likelihood of a change in the repo rate remains low, although global economic conditions and inflation trends could influence the policy decision.
Economists and market analysts broadly expect the RBI to keep the repo rate unchanged at 5.25%. According to a Moneycontrol survey, 10 out of 14 experts forecast that the central bank will leave policy rates unchanged. Some experts, however, have indicated that future interest rate increases cannot be ruled out if inflationary pressures intensify.
The RBI began a monetary easing cycle in February 2025, during which it reduced rates by a cumulative 125 basis points. The repo rate was subsequently kept unchanged in the policy meetings held in February and April 2026.
If the repo rate remains unchanged, there will be no immediate relief in interest rates on home loans, car loans and other personal loans, and equated monthly instalments (EMIs) will remain at current levels.
Banks generally determine their lending rates based on the cost of funds available from the RBI. When the repo rate rises, banks typically increase lending rates, resulting in higher EMIs. Conversely, a reduction in the repo rate can lead to lower borrowing costs and reduced EMIs.
The repo rate has a direct relationship with inflation. When inflation rises, the RBI often increases interest rates to moderate demand. The objective is to reduce liquidity in the market and control the pace of spending.
An increase in the repo rate raises the cost of borrowing for banks from the RBI, which is often passed on to customers through higher lending rates. As borrowing becomes more expensive and EMIs increase, consumers may shift from spending toward saving.
Banks may also raise interest rates on fixed deposits (FDs), encouraging greater investment in deposits. This can reduce market demand and contribute to controlling inflation over time.
