Good news for home loan

RBI Cuts Repo Rate by 50 Basis Points: Home Loan EMIs Set to Drop Sharply

by

Good news for home loan
In a major relief for home loan borrowers, the Reserve Bank of India (RBI) has announced a significant cut in the repo rate during its Monetary Policy Committee (MPC) meeting held on June 7, 2025. The central bank slashed the repo rate by 50 basis points (0.50%), bringing it down from 6% to 5.5%. This move comes as the third consecutive rate cut this year, following earlier reductions of 25 basis points each in February and April.

What the Repo Rate Cut Means for Borrowers

The repo rate is the rate at which RBI lends money to commercial banks. A lower repo rate enables banks to borrow funds at a cheaper cost, which in turn allows them to reduce lending rates for consumers. For millions of Indians with housing loans, this translates directly to lower EMIs (Equated Monthly Installments).

Industry estimates suggest that for a ₹30 lakh home loan over a 20-year tenure, EMIs could decrease by approximately ₹2,000 per month, provided banks pass on the full benefit of the rate cut to customers. Interest rates on home loans could now come down to 7.5% or lower, reinvigorating consumer sentiment in the housing market.

Additional Measures to Boost Liquidity

Alongside the repo rate cut, the RBI also announced a 1% reduction in the Cash Reserve Ratio (CRR), bringing it down to 3%. This move frees up additional liquidity in the banking system, enabling banks to extend more credit to businesses and individuals. The Standing Deposit Facility (SDF) rate has also been adjusted to 5.25%, and the bank rate is now at 5.75%.

RBI Governor Sanjay Malhotra explained that the decision was guided by consistently low retail inflation—hovering below 4%—and steady GDP growth. “This is the right time to inject further liquidity and reduce borrowing costs, encouraging consumption and investment,” he said.

Positive Impact on the Real Economy

The rate cut is expected to have a broader positive impact on India’s economy. Lower interest rates typically boost borrowing for housing, automobiles, and consumer durables, helping to stimulate demand across sectors. The move is especially timely, given the government’s ongoing push to support affordable housing and infrastructure-led growth.

Strong Forex Reserves Reinforce Economic Stability

The RBI governor also highlighted India’s robust foreign exchange reserves, which currently stand at $691.5 billion. This massive reserve provides a cushion against global uncertainties and ensures that India can continue importing essential goods such as crude oil, machinery, and pharmaceuticals for up to 11 months without disruption.

Bottom Line

With this bold and larger-than-expected repo rate cut, the RBI has sent a clear signal that it is committed to supporting economic growth through increased liquidity and lower borrowing costs. For homebuyers, especially those planning large loans, this could be the perfect time to take advantage of falling interest rates and lock in lower EMIs.

Author Profile

Kuldeep Singh Chundawat
Kuldeep Singh Chundawat
My name is Kuldeep Singh Chundawat. I am an experienced content writer with several years of expertise in the field. Currently, I contribute to Daily Kiran, creating engaging and informative content across a variety of categories including technology, health, travel, education, and automobiles. My goal is to deliver accurate, insightful, and captivating information through my words to help readers stay informed and empowered.