RBI Slashes Repo Rate By 25 Basis Points To 5.25%, Loans Set To Get Cheaper

In a major move to boost economic activity, the Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, bringing it down to 5.25%. This decision by the Monetary Policy Committee (MPC) is expected to make home loans, car loans, and personal loans cheaper for millions of borrowers across the country.

What This Means

The repo rate is the interest rate at which RBI lends money to commercial banks. When the repo rate is reduced, banks can borrow funds at a lower cost — and in turn, pass on the benefit to customers through reduced loan EMIs.

With the new reduction, borrowers can expect lower monthly instalments on existing and new loans once banks revise their lending rates.

Why RBI Reduced the Rate

The central bank’s rate cut comes amid:

• Slowing economic growth

• Decreased consumer spending

• The need to encourage borrowing and investment

• Stable inflation levels giving RBI room for monetary easing

The MPC stated that the decision aims to support domestic demand and stimulate economic recovery.

Impact on Borrowers

The rate cut is good news for individuals planning to take or currently paying:

• Home loans

• Car loans

• Education loans

• Personal loans

Banks are now expected to reduce the MCLR and repo-linked lending rates, making EMIs lighter for customers.

Impact on the Economy

Cheaper loans typically:

• Boost consumer spending

• Encourage businesses to invest

• Improve liquidity in the market

• Support overall economic growth

Experts believe this move could help accelerate India’s economic momentum in the coming quarters.

What You Should Do

• Check if your loan is repo-linked or MCLR-based to get benefits quickly

• Compare rates across banks before taking a new loan

• Consider prepayment if your bank reduces interest rates