Repo Rate impact on Loan EMI: The Reserve Bank of India (RBI) has cut the repo rate by 0.50%, which is expected to make home loans and auto loans cheaper. RBI Governor Sanjay Malhotra said that this cut will give banks an additional amount of Rs 2.50 lakh crore, which will help in loan distribution. It is expected that this will increase the demand for real estate and automobiles and give impetus to the economy.
The ground has been prepared for a reduction in the rates of home loans and auto loans in the country within the next few days. In the Monetary Policy Review (MPC) (RBI Monetary Policy) meeting, the repo rate, which determines the rates of banking loans, has been cut by 50 basis points i.e. 0.50 percent.
The decisions of the three-day MPC meeting were announced by RBI Governor Sanjay Malhotra. The MPC has met thrice under the chairmanship of Malhotra and in all these three meetings, it has been decided to reduce the repo rate (RBI Repo Rate Cut).
Repo rate reduced by 5.50 percent in 6 months: RBI
In the meeting of February 2025 and April 2025, the repo rate has been cut by 25-25 basis points. In this way, the repo rate has come down by one percent to 5.50 percent within the last six months. The RBI Governor has expressed hope that the banks will give the benefit of the decision to reduce the repo rate to the general public.
What will be the effect?
It is believed that after a one-time cut of 50 basis points, there will be a rapid reduction in the rates of home loans, auto loans, personal loans and other banking loans. In February and April, RBI cut the repo rate by 0.50 percent overall, but the data shows that the loan rates of banks have been cut by only 0.17 percent on average. It is clear that the banks have not given the full benefit to the general customers. But after Friday’s cut, they can give the benefit of more loan reduction to the general public.
What is repo rate?
This will increase the demand for real estate and automobiles in the country. This will have a positive impact on the economy. Repo rate is the rate at which commercial banks borrow funds from RBI for a short-term period. It is largely used to meet the demand for various types of banking loans. This is the reason that when RBI reduces the repo rate, then taking loans from banks also becomes cheaper and when it is increased, the loan becomes expensive.
Economic development will gain momentum
Governor Malhotra has said that a 0.50 percent cut in the repo rate will make an additional amount of Rs 2.50 lakh crore available in the banking system, which banks will use for loan distribution. Experts say that a one-time cut of 50 basis points in the repo rate reflects RBI’s stance that the government is with increasing the pace of rapid economic growth.
There will also be relief from inflation
On one hand, there is a possibility of a decline in the global growth rate after the US initiated the global trade war, while the annual growth rate of the Indian economy is likely to remain at 6.5 percent. Announcing the decisions of the review meeting, the RBI Governor has said that the economic growth rate will be 6.5 percent in the year 2025-26. According to this, India will remain the fastest growing economy in the world for the third consecutive year. Governor Malhotra has also said that the sting of inflation will also be less this year.