The Reserve Bank of India (RBI) has announced a quarter-percent reduction in the repo rate for the second consecutive time, paving the way for a decrease in home loan EMIs.
After this, the repo rate has decreased from 5.25 to 6%. It is anticipated that the burden of loan installments will be slightly alleviated, providing some relief to borrowers.
This time, the Reserve Bank has shifted its policy stance from neutral to accommodative, indicating a potential reduction in interest rates in the future.
However, the RBI Governor made it clear that the growing uncertainty in the international market may impact India’s exports. In particular, the increase in tariffs in the United States is likely to affect both the Indian currency and trade.
However, it is anticipated that following today’s rate cut, banks will also lower interest rates, potentially resulting in a savings of ₹781 per month on the EMI for a loan of ₹50 lakh.
Apart from this, the Reserve Bank of India (RBI) has slightly revised its growth rate estimate for the country. Previously, the growth estimate for 2025-26 was approximately 6.5%, but it has now been adjusted to 6%.
It is a relief that the estimate for the retail inflation rate has been lowered from 4.2% to 4%.
After a thorough assessment of the changing economic and financial conditions, Outlook the Monetary Policy Committee (MPC) voted unanimously to reduce the policy repo rate by 25 basis points to 6%, effective immediately.
Consequently, the Standing Deposit Facility (SDF) rate under the Liquidity Adjustment Facility (LAF) will be adjusted to 5.75%. Additionally, the Marginal Standing Facility (MSF) rate and the Bank rate will be adjusted to 6.25%.
Even prior to this, adjustments were made to the repo rate. Although the repo rate was reduced, this decrease was not observed to be passed on.
This time, it is anticipated that the banks will pass on the benefits at their own discretion, providing relief to the public.
In February, we experienced a reduction of 25 basis points, marking the first decrease in five years.
We had observed that interest rates were being reduced, and there was an expectation that banks would respond in kind shortly.
The transmission was not particularly fast; however, there has been a cumulative reduction of 50 basis points over the past two months.
It is anticipated that you will observe a reduction of at least 25 basis points in lending rates.
may initiate this process, and subsequently, other banks may follow suit.
We will soon learn how quickly this transmission will occur, the duration of each tenure, and which loans will be affected.
Among home loans, auto loans may be the most impacted by this situation. Therefore, news of relief is likely to emerge in the coming month or two.
If individuals are considering taking out a loan, they should pause their decision, as interest rate cuts are still occurring. They may be able to secure more favorable rates from banks in the near future.
Now, the second factor to consider is the impact on deposit rates. This is important to note, as we have been observing the highest rates on fixed deposits (FDs) to date.
For the past four years, we have been experiencing the highest interest rates ever, as there has been no change in these rates.
That means people who invest in fixed deposits (FDs) and recurring deposits (RDs) were receiving very good returns. For senior citizens, many banks were offering interest rates of up to 8.5% to 9% on their FDs.
However, since there will be a change in lending rates, it is anticipated that deposit rates will also be affected.
So, lock in your highest rates right now, as there could be an impact here as well future.