RBI Monetary Policy Update: No Rate Cut Announced, What It Means for Home and Car Loan Borrowers

The much-anticipated Reserve Bank of India (RBI) monetary policy update has brought disappointment for those waiting for a festive season rate cut. Despite widespread expectations of a 25-basis point reduction in the repo rate, the central bank decided to keep policy rates unchanged.

RBI Governor Sanjay Malhotra, while addressing the media on October 1, 2025, announced that the Monetary Policy Committee (MPC) has chosen to maintain the repo rate at its current level. This decision means there will be no immediate reduction in home loan, car loan, or personal loan interest rates, much to the disappointment of borrowers hoping for cheaper EMIs this festive season.

RBI Maintains Status Quo on Interest Rates

The MPC meeting, which began on September 29 and concluded on October 1, was closely watched by economists and the financial sector. Many had predicted a possible 0.25% cut in the repo rate to boost credit demand during the festive season. However, the central bank opted for a cautious approach, leaving interest rates unchanged.

This marks the second consecutive meeting where the RBI has chosen not to alter the repo rate. The last adjustment came earlier this year when the central bank reduced rates cumulatively by 100 basis points — with cuts of 25 bps in February, 25 bps in April, and 50 bps in June. As a result, the repo rate currently stands at 5.5%, down from 6.5% at the beginning of 2025.

Why the RBI’s Move Matters

The repo rate — the rate at which RBI lends money to commercial banks — directly impacts loan interest rates for consumers. Typically, when repo rates are lowered, banks pass on the benefit by reducing interest rates on home loans, car loans, and other forms of credit. This makes borrowing cheaper and boosts demand across sectors such as housing, automobiles, and consumer goods.

With the RBI holding rates steady this time, those planning to take a home or car loan will not see an immediate drop in interest costs. However, experts believe this decision reflects the RBI’s strategy of maintaining financial stability amid global uncertainties, inflationary pressures, and concerns over fiscal balance.

Impact on Home Loan and Car Loan Borrowers

Borrowers looking to purchase homes or cars this festive season may feel disappointed, as EMIs will remain unchanged for now. Usually, a cut in repo rate results in a direct reduction in home loan EMIs, saving customers thousands over the tenure of their loan.

For existing home loan customers, a reduction would have meant two choices — either lowering monthly EMI payments or reducing the loan tenure. Since that hasn’t happened, many borrowers will now look forward to the December policy review, where analysts expect another opportunity for a rate cut.

The situation is slightly cushioned by other factors. Car prices have already fallen due to recent GST rate cuts, and real estate experts anticipate further softening in housing prices. This could partly offset the disappointment of unchanged loan interest rates.

What Should Borrowers Do Now?

Financial advisors suggest that customers planning to take a home loan should consider floating interest rate options, as these will benefit from any future rate cuts. With the RBI having already reduced the repo rate by 1% this year, lending rates are at relatively attractive levels compared to last year.

If further rate cuts are announced in December or February, borrowers can approach their banks to renegotiate their loan terms. If the current bank does not pass on the benefit, customers also have the option of loan transfer to another bank offering lower rates.

In short, while the festive season has not brought an interest rate relief, borrowers still have strong reasons to remain optimistic about potential rate cuts in upcoming policy reviews.

Looking Ahead

Economists remain divided on the RBI’s cautious approach. While some argue that holding rates steady is necessary to curb inflation and maintain macroeconomic balance, others believe that further easing could have stimulated festive demand and boosted economic growth.

For now, the RBI’s stance signals that while borrowers must wait a little longer for cheaper loans, the overall direction of policy still favors gradual rate reduction. The next few months will be crucial in determining whether homebuyers and automobile customers get the financial relief they are hoping for.