Home, Auto Loans to Get Cheaper as RBI Cuts Repo Rate to 6%

New Delhi, April 9, 2025 — In a move aimed at boosting economic activity, the Reserve Bank of India (RBI) on Tuesday cut the repo rate by 25 basis points (bps), bringing it down from 6.25% to 6%. The decision was announced after the conclusion of the central bank’s first bi-monthly monetary policy review for the financial year 2025-26.

The Monetary Policy Committee (MPC), comprising six members, also changed the RBI’s policy stance from “neutral” to “accommodative,” indicating the possibility of further rate cuts if needed to support growth.

Following the announcement, RBI Governor Sanjay Malhotra said, “The global economic outlook is shifting rapidly. FY26 has begun on a cautious note as global trade frictions are becoming a reality.”

This is the second consecutive repo rate cut by the RBI. In its February 2025 policy review, the MPC had also slashed the repo rate by 25 bps—the first rate cut in nearly five years—bringing it to 6.25% at that time. The latest rate cut is expected to lead to cheaper home, personal, and vehicle loans, with EMIs likely to decrease as banks adjust their lending rates linked to the repo rate.

Growth and Inflation Outlook

The RBI also revised its GDP growth forecast for 2025-26 from 6.7% to 6.5%, citing rising global economic challenges and trade uncertainties. Meanwhile, retail inflation for the year is projected at 4%, well within the central bank’s target range.

Data from January and February 2025 showed an average consumer price index (CPI) inflation rate of 3.9%, slightly below the RBI’s expected range for the final quarter of FY25, where inflation is now pegged at 4.8%.

Implications for Borrowers

The repo rate is the rate at which the RBI lends short-term funds to commercial banks. A cut in this rate typically results in a reduction in external benchmark lending rates (EBLR), translating into lower EMIs for borrowers. Banks are expected to adjust their lending rates in the coming days.

While banks had adjusted their EBLR following the February rate cut, further adjustments in marginal cost of funds-based lending rates (MCLR) may also follow, particularly as full transmission of previous repo rate hikes (totaling 250 bps between May 2022 and February 2023) has not yet occurred. During that period, the average one-year MCLR rose only by 178 bps.

RBI’s Balanced Approach

Governor Malhotra emphasized that the central bank is striving to strike a delicate balance between global risks and domestic economic support. “We are committed to keeping credit affordable and accessible, especially in a volatile global environment,” he said.

The rate cut is expected to provide relief to borrowers while also encouraging spending and investment, offering a potential boost to India’s economic momentum in the face of rising international headwinds.