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RBI Keeps Repo Rate Unchanged at 5.25% Amid West Asia Crisis

  • by- Zaid
  • Jun 5, 2026
The Reserve Bank of India has maintained its interest rates for the second consecutive time as the ongoing West Asia conflict disrupts energy supplies and raises crude oil prices. The Monetary Policy Committee unanimously decided to keep the repo rate at 5.25 percent with a neutral stance.
RBI Keeps Repo Rate Unchanged at 5.25% Amid West Asia Crisis

MUMBAI, June 5: The Reserve Bank of India (RBI) on Friday expectedly kept interest rates unchanged for the second time in a row as it weighed the impact of rising energy prices and supply disruptions caused by the three-month-long West Asia crisis.

Announcing the second bi-monthly monetary policy for the current fiscal, RBI Governor Sanjay Malhotra said the Monetary Policy Committee (MPC) has unanimously decided to retain the short-term lending rate or repo rate at 5.25 per cent with a neutral stance.

The policy decision comes amid a conflict in West Asia that has disrupted energy supplies, leading to a surge in crude oil prices, and created fiscal and inflationary pressures for import-dependent countries like India.

Inflation Close to Target, But Risks Remain

The interest rate pause comes even as the Consumer Price Index (CPI) based headline retail inflation has moved closer to the RBI's medium-term target of 4 per cent, recording 3.48 per cent in April.

However, there is fear of inflation further inching up due to expected weak monsoon and fuel price rise in the coming months. The central bank appears to be adopting a wait-and-watch approach before any further rate action.

Rupee Depreciation: A Growing Concern

Additionally, the rupee has been depreciating continuously since the beginning of this year. The rupee settled at a record closing low of 96.86 against the USD on May 20, 2026, dropping 33 paise from its previous close.

Once considered among Asia's more stable currencies, the rupee has now become one of the worst-performing emerging market currencies this year, pressured by a mix of:

  • Expensive oil imports

  • Capital outflows

  • Widening trade deficits

  • A surging US dollar

The rupee has depreciated about 7 per cent so far in 2026 and is down roughly 6 per cent since the outbreak of the Iran conflict in late February.

Previous Rate Reductions in 2025

Based on the recommendation of the MPC, the RBI had reduced the repo rate multiple times in 2025 amidst easing retail inflation:

  • 25 basis points each in February, April, and December 2025

  • 50 basis points in June 2025

India's retail inflation dropped to a historic low of 0.25 per cent in October 2025, marking the lowest level since the CPI series was introduced. That deflationary environment had allowed the central bank to adopt an accommodative stance.

What Lies Ahead?

With the West Asia crisis showing no signs of immediate resolution, crude oil prices remain elevated, and the rupee continues to face pressure. The MPC's decision to maintain status quo reflects the delicate balancing act facing the central bank – supporting growth while keeping inflationary expectations anchored.

For home loan borrowers and businesses, the unchanged repo rate means no immediate relief in borrowing costs. The neutral stance suggests the RBI is keeping its options open, ready to act as the situation evolves.