New RBI Repo Rate Change and Its Effect on Personal Loans in India (2025 Update)

1. What’s the Latest Repo Rate Update?

As of the August 6, 2025 Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) has kept the repo rate unchanged at 5.50%, maintaining its neutral monetary stance. This follows three consecutive cuts earlier in 2025, where rates were lowered by a total of 100 basis points.

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2. What Led to This Decision?

The RBI’s decision to pause further rate cuts was influenced by multiple factors:

• Global Trade Concerns: Persistent risks from rising U.S. tariffs impacting Indian exports and overall growth.

• Inflation Trends: Headline inflation cooled to a multi-year low (2.1% in June 2025), but core inflation continues to remain above the RBI’s comfort zone of 4%.

• Stable Economic Outlook: India’s GDP growth projection for FY 2025–26 remains steady at 6.5%, giving the central bank room for cautious optimism.

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3. What This Means for Personal Loan Borrowers

• Existing Borrowers (Floating Rate Loans): Since the repo rate is unchanged, your EMI will remain stable for now. No immediate relief, but also no added burden.

• New Borrowers: With no fresh rate cut, interest rates won’t drop further in the short term. However, comparing offers among lenders can still get you a competitive deal.

• Lenders: For example, SBI reduced its MCLR by up to 5 basis points in mid-August, giving small EMI relief to some borrowers.

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4. Real-Life Example

Suppose you have a ₹5 lakh personal loan at 12% interest:

• With the repo rate unchanged, your EMI won’t change.

• But if rate cuts don’t happen further, this may be the right time to consider a balance transfer to a bank offering better rates.

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5. Market Trends & Bank Margins

The repo rate cuts earlier in 2025 did lower lending rates, but banks are struggling with tight margins. Net Interest Margins (NIMs) for banks slipped to a three-year low of 3.98%, as deposit costs remain high.

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6. Borrower Action Plan

Here’s how borrowers can stay ahead:

✅ Track MCLR and EBLR rates – Some banks like SBI are already passing partial benefits.
✅ Compare lenders & spreads – Interest rates differ across banks.
✅ Consider refinancing – A balance transfer can save money if better offers exist.
✅ Use EMI calculators – Plan budgets and simulate future scenarios.

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FAQs

Q1. What is the current repo rate in India (August 2025)?
A: 5.50% (unchanged since August 6, 2025).

Q2. Will my personal loan EMI change now?
A: No, floating-rate EMIs remain the same.

Q3. Why did RBI pause rate cuts?
A: Global trade risks, sticky core inflation, and the need to let earlier cuts flow into the economy.

Q4. Any relief from banks like SBI?
A: Yes, SBI cut its MCLR by up to 5 basis points in August 2025.

Q5. Does this affect fixed-rate loan borrowers?
A: No, fixed-rate EMIs remain unchanged.

Q6. Should I wait before borrowing?
A: With repo rate near its lower limit, the window for cheaper loans is closing. Borrowers should compare lenders now.

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Conclusion

The RBI’s decision to hold the repo rate steady at 5.50% means personal loan borrowers won’t see immediate EMI changes. However, with banks already adjusting spreads and MCLR, it’s a good time to review your loan, compare offers, and consider refinancing.

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