RBI October Policy: Stable Interest Rates to Keep Home Loan EMIs Unchanged

Mumbai, 1st October 2025: The Reserve Bank of India (RBI) announced on Wednesday that the Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 5.5% in its October review. This marks the second consecutive policy meeting without a change in the repo rate, following three reductions totaling 1% earlier this year in February, April, and June.

RBI Governor Sanjay Malhotra stated that the central bank’s stance remains “neutral,” emphasizing the need to assess the impact of previous rate cuts before any further action. The Standard Deposit Facility (SDF) rate has been maintained at 5.25%, while the Marginal Standing Facility (MSF) and Bank Rate remain at 5.75%. The reverse repo rate continues at 3.35%.

Economic Growth Outlook Revised Upwards
Governor Malhotra projected India’s GDP growth at 6.8% for FY26, up from the earlier forecast of 6.5%. He noted that robust domestic demand and supportive policy measures are expected to drive growth. However, he cautioned that developments in tariffs could moderate growth in the second half of the fiscal year.

Inflation Forecast Lowered Amid GST Reforms
The RBI has revised its average inflation forecast for FY26 down to 2.6% from 3.1%. “GST reforms are expected to exert downward pressure on inflation,” Governor Malhotra said, highlighting that growth-inflation dynamics have shifted since the August policy review. He also noted that a sharp decline in food prices has improved the overall inflation outlook.

Measures to Boost Infrastructure Financing and Credit Flow
To reduce financing costs for the infrastructure sector, the RBI has lowered risk weights for loans provided by non-banking finance companies (NBFCs). Governor Malhotra said, “The effects of interest rate cuts are beginning to be seen,” and stressed that domestic growth is expected to continue into the second quarter.

The central bank also announced steps to enhance credit flow to the real economy, including a framework for Indian banks to finance corporate acquisitions and proposals to lift regulatory limits on lending against listed debt securities. For urban cooperative banks (UCBs), plans are underway to license new institutions, with a discussion paper expected soon.

Financial Inclusion and NRI Banking Initiatives
In a significant move for Indian expatriates, banks in Bhutan, Nepal, and Sri Lanka will now be allowed to provide loans to non-resident Indians (NRIs) in Indian rupees. Additionally, services for Basic Savings Bank Deposit account holders may soon expand to include mobile and internet banking without any minimum balance requirements.

Liquidity, Rupee, and External Sector Stability
Governor Malhotra highlighted that India’s foreign exchange reserves stand at $700.2 billion, sufficient to cover 11 months of imports. He assured that the RBI is closely monitoring rupee movements amid market volatility, while maintaining that the external sector remains resilient. The recent reduction in the cash reserve ratio (CRR) is expected to improve banking liquidity, ease debt flows, and support financial stability.

IPO Financing Limit Increased
As part of its policy measures, the RBI has raised the IPO financing limit to ₹2.5 million per investor, providing greater access to capital markets for retail investors.

Governor Malhotra concluded by stating that the RBI remains committed to ensuring financial stability while supporting sustainable economic growth, carefully monitoring domestic and external developments to guide future policy actions.