RBI Monetary Policy: Home, Auto Loans to Become Cheaper as RBI Cuts Repo Rate by 50 Basis Points

RBI Monetary Policy: In a move that brings relief to millions of loan borrowers, the Reserve Bank of India RBI Cuts the repo rate by 50 basis points, bringing it down to a three-year low of 5.5 percent. The decision, announced on Friday, reflects the central bank’s aggressive stance to revive economic growth, which has dipped to a four-year low of 6.5 percent in the current financial year.

With this cut, home, auto, and corporate loans are expected to become more affordable, easing the burden on consumers and businesses alike. The repo rate—the interest rate at which the RBI lends money to commercial banks—last stood at 5.40 percent in August 2022. The fresh reduction indicates a decisive turn in the central bank’s monetary policy approach.

RBI Governor Sanjay Malhotra stated that the decision followed a comprehensive review of economic trends and the financial outlook. The Monetary Policy Committee (MPC) concluded that a 50 basis point cut would provide much-needed momentum to a sluggish economy, while also cushioning borrowers from high-interest costs.

Since February 2025, the RBI has now reduced the policy rate by a total of 100 basis points, including a 25 bps cut in April. This marks the third consecutive rate cut in recent months—a first since the onset of the COVID-19 pandemic in 2020. The back-to-back reductions underscore the urgency with which the central bank is addressing the economic slowdown.

However, despite the rate cut, Governor Malhotra maintained the GDP growth forecast at 6.5 percent for FY25, indicating confidence in a gradual recovery. The inflation outlook has also improved, with projections lowered to 3.7 percent from the earlier 4 percent estimate. A favorable monsoon is expected to help ease price pressures, particularly on food items.

Notably, the policy stance has shifted from ‘accommodative’ to ‘neutral’, signaling a more balanced approach in the months ahead. The RBI appears to be front-loading its support to growth, while keeping a close eye on inflation and external factors that could influence the economy.

As the new policy rate kicks in, banks are expected to pass on the benefit to borrowers, making home and vehicle loans cheaper in the coming weeks. For many Indian households and businesses, this comes as a welcome break in a time of economic uncertainty.