RBI Governor Sanjay Malhotra Unveils Bold Move – Repo Rate Drops to 6%

RBI Governor Sanjay Malhotra said that the Monetary Policy Committee (MPC) had collectively voted to reduce the policy rate (i.e. repo rate) by 25 basis points on Wednesday (April 9, 2025), which is straight down to 6% with immediate effect. This marks the second consecutive policy rate cut this year. The previous reduction occurred in February 2025 after a five-year gap, and now, this latest cut reflects a significant shift in response to ongoing economic uncertainties just two months later.

Governor Malhotra emphasized a significant change in the policy stance from ‘neutral’ to ‘accommodative.’ This change indicates that the Monetary Policy Committee (MPC) will primarily consider maintaining the current rates or implementing further cuts in future decisions, barring any unforeseen circumstances.

The New Financial Year (2024-25) begins on an anxious note for the global economy, and the central bank is monitoring global uncertainties arising from inflation risks. This comes days after U.S. President Donald Trump’s administration imposed tariffs on exports from India. Additionally, at the same time, RBI has lowered its real GDP growth from 6.7% to 6.5%.

Benefits of Repo Rate Cut Repo Rate Cut for borrowers across all Financial Segments:

The RBI monetary policy impacts on loans will be majorly seen on home loans and mortgages, where lower rates will reduce EMIs for new and existing borrowers, making housing more affordable and refinancing more desirable. Similarly, Personal loan, Gold loan, and car loans will also experience a fall in interest rates, reducing borrowing costs for individuals looking to borrow money for personal expenditure or vehicle purchases. This creates an opportunity for consumers to secure loans at lower costs, by reducing financial strain.

On the business side, SMEs, MSME’s and other corporations can benefit from reduced borrowing costs by improving their access to capital for expansion or operational needs. This policy rates also boosts the financial flexibility of businesses, as they can refinance existing loans at better terms. However, this rate cut might put savings accounts and fixed deposits under pressure, as banks typically reduce deposit rates to maintain their margins. The stock market could see a positive reaction, as lower borrowing costs and the anticipation of economic growth may encourage investor confidence, particularly in sectors like real estate and infrastructure. Overall, this policy move is aimed at stimulating growth, improving liquidity, and creating favorable conditions for borrowing across various segments.

Will Home loans get cheaper after today’s announcement?

This reduction in the repo rate creates favourable conditions for those refinancing their current home loans as well as for new homebuyers. With reduced home loan interest rates, homeowners have the opportunity to lower their EMI payments or shorten the duration of their loans while maintaining the same EMIs. As a result, the effect of RBI policy impacts loans to obtain it at more competitive interest rates, leading to more adjustable monthly payments (EMIs). Currently, the lowest rate on ongoing home loans is 8.10%, which could drop to around 7.85% by nationalised banks following this rate cut.

Here’s how the repo rate cut impacts home loans:

1. Direct Impact on Interest Rates: The repo rate reduction means banks may lower their benchmark lending rates. These rates directly affect home loan interest rates. If banks pass the rate cut to consumers, borrowers will benefit from lower home loan interest rates.
2. Lower Borrowing Costs: As home loan rates come down, the borrowing costs decreases to make home loans more affordable. This will particularly benefit first-time homebuyers and those looking to refinance their existing home loan at lower interest rates.
3. Refinancing Opportunities: For those with existing home loans, Borrowers can potentially negotiate for lower interest rates, which could reduce their monthly payments or help them pay off their loans faster without increasing the EMI.
4. Long-Term Benefits: If the rate cut leads to sustained lower interest rates, home loan borrowers may have a significant amount of savings over their loan term, especially for long-tenure loans.

Conclusion:

At Loan Bazaar, we see the RBI’s recent decision to reduce the repo rate as a golden opportunity for all retail loan segments. It is intended to manage inflation and boost economic growth as it is going to cut borrowing costs. It’s a good time for loan seekers to avail more economic financing, as all retail loans will become economical.

This shift creates an excellent opportunity for individuals and businesses to capitalize on lower rates and obtain the financing they require to meet their objectives. This is the ideal time to move for those looking at home, mortgages or business investments. With lower interest rates, now is the time to invest in your dream home or expand your business with more manageable loan terms.

Contact us now, and let us help you navigate the policy shift to the next tier of your financial growth.