In a much-awaited development bringing relief to millions of borrowers, the Reserve Bank of India (RBI) has announced a reduction in the repo rate by 25 basis points, bringing it down to 6 percent. This decision, declared during the RBI’s first monetary policy review of the financial year 2026, is expected to lower interest rates on loans, thereby reducing monthly EMIs for home, car, and other floating-rate loans.
The repo rate, which directly influences lending rates in the banking sector, is a key tool used by the RBI to manage inflation and stimulate economic growth. With this latest reduction, borrowers on floating interest rate loans are likely to see their EMIs decrease, depending on their respective banks’ revised interest rates.
RBI Governor Sanjay Malhotra officially announced the rate cut, stating, “This move is aimed at enhancing investment and consumption in the market amid improving inflation conditions and global economic uncertainty.”
Over the past few months, inflation has shown a declining trend, with the rate falling from 4.26% in February to 3.61%, dipping below the RBI’s target of 4%. As a result, the central bank felt confident enough to stimulate the economy through a rate cut.
Borrowers can expect a moderate reduction in their EMIs, but the extent of the benefit will depend on the terms of their loans and the interest rate revisions by individual banks. Those with floating-rate loans will benefit directly, while fixed-rate loan holders may not see any immediate change.
Governor Malhotra emphasized the dual objective of the policy decision, saying, “Our aim is to control inflation while simultaneously supporting economic growth. We are confident of meeting the 4% inflation target and are now shifting our policy stance from neutral to accommodative.”
He added that banks are expected to revise their lending rates soon, which will encourage the purchase of homes, vehicles, and other big-ticket items, further boosting the economy.
The reduction in the repo rate has been welcomed by both industry and consumers. It is expected to revive borrowing activity, ease financial burdens, and strengthen consumer confidence. With inflation under control and the cost of borrowing set to decline, this move is seen as a timely intervention to support economic momentum in the early months of 2025.