New Delhi: In its bid to lower the cost of borrowing and encourage economic growth, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points, from 6.5% to 6.25%. It was the first rate cut in five years, and homebuyers, car owners, and other loan borrowers will breathe easier Following the cut.
Impact on Loan EMIs
With the repo rate coming down, loans will become cheaper, and it will positively impact all existing and new borrowers. Now, this rate cut affects monthly EMIs as follows:
Home Loan of ₹25 Lakh (20 Years): Will see EMI dip by ₹397/month, annual saving: ₹4,766
EMI decreases by ₹801 per month, saving ₹9609 annually on ₹50 Lakh home loan (20 years)
Home loan of ₹1 Crore (20 years): EMI down ₹1,589/ month, annual saving ₹19,068
Expert Reactions
Voice of Banking founder Ashwani Rana hailed the decision, saying it would greatly relieve middle-class families struggling with high EMIs. Likewise, Praveen Khandelwal of CAIT noted that cheaper EMIs would enhance disposable income and be a good booster to consumer spending, increasing liquidity and boosting economic activities.
Economic Context
The decision came at the end of RBI Governor Sanjay Malhotra’s Monetary Policy Committee (MPC) meeting. The committee, however, noted that inflation was moderating and that the cut was necessary to support economic recovery. In an optimistic revision, the central bank revised its GDP growth forecast for FY26 to 6.7% based on the “resilient performance of domestic economic activity” despite global economic headwinds.
What Borrowers Should Know
However, borrowers with floating-rate loans tied to the repo rate will benefit immediately as banks pass on the reduction in key lending rates. Reduced interest rates on home loans, car loans, and personal loans benefit new borrowers, too.
The policy shift aligns with the government’s strategy of inducing consumption-led growth after tax relief measures were announced in Budget 2025-26.