RBI Cuts Repo Rate by 0.25% to 6%: Loans May Get Cheaper, EMI to Reduce
In a significant move aimed at boosting the economy, the Reserve Bank of India (RBI) has cut the repo rate by 0.25% for the second consecutive time. With this reduction, the repo rate now stands at 6%, down from the earlier 6.25%. This could lead to cheaper loans and reduced EMIs for borrowers.
RBI Governor Sanjay Malhotra announced the decision during a press briefing held at 10 AM on April 9, following the conclusion of the Monetary Policy Committee (MPC) meeting which began on April 7.
Earlier, in February 2025, the RBI had also reduced the repo rate by 0.25%, marking the first rate cut in nearly five years. That cut brought the rate down from 6.50% to 6.25%.
What Does the Repo Rate Cut Mean for You?
With the reduction in repo rate, banks are likely to lower interest rates on housing and auto loans, making borrowing cheaper for consumers. Consequently, monthly EMIs on existing and new loans may decrease. This could also lead to an increase in demand for homes and boost investment in the real estate sector.
What is the Repo Rate?
The repo rate is the interest rate at which the RBI lends money to commercial banks. When the repo rate is lowered, banks get funds at cheaper rates, enabling them to offer loans to consumers at reduced interest rates.
Why Does the RBI Change the Repo Rate?
The central bank uses the repo rate as a tool to control inflation and ensure economic stability. When inflation is high, the RBI raises the repo rate to curb money flow in the economy. Conversely, during periods of slow economic growth, the repo rate is reduced to encourage borrowing and spending, thereby aiding economic recovery.
Key Highlights from the RBI Governor’s Address
- Repo Rate Cut: RBI unanimously decided to cut the repo rate by 0.25%, bringing it down to 6%.
- Policy Stance: The monetary policy stance was changed from “neutral” to “accommodative.”
- Global Challenges: Global trade frictions are expected to affect domestic growth.
- Export Impact: High tariffs are likely to negatively impact net exports.
- Inflation Control: Falling crude oil prices are expected to help keep inflation under control.
- UPI Transaction Cap: NPCI has been granted authority to set limits on consumer-to-merchant UPI transactions. Currently, the cap is ₹2 lakh.
- Gold Loan Guidelines: New guidelines for gold loans will soon be announced.
Inflation Trends
Retail inflation dropped to 3.61% in February 2025, the lowest in the past seven months, primarily due to lower prices of pulses and vegetables. In contrast, January 2025 recorded a rate of 4.31%. The RBI aims to keep inflation within a target range of 2%-6%.
However, wholesale inflation rose slightly to 2.38% in February from 2.31% in January, mainly due to increased production costs in food items.
RBI’s Monetary Policy Committee: Structure and Meeting Schedule
The Monetary Policy Committee consists of six members—three from the RBI and three appointed by the Central Government. The committee typically meets every two months. For the financial year 2025-26, six meetings are scheduled, with the first held between April 7 and 9, 2025.
