RBI Cuts Repo Rate to 6.0%: What it Means for New & Existing Home Loan Borrower

BASIC TEAM

In a move aimed at bolstering growth and supporting borrowing amid rising global and domestic challenges, the Reserve Bank of India (RBI) today cut the policy repo rate by 25 basis points, bringing it down from 6.25% to 6.0%. The decision, announced by RBI Governor Sanjay Malhotra, comes after a three-day meeting of the six-member Monetary Policy Committee (MPC) that began on April 7.

This marks the second consecutive RBI repo rate cut under Governor Malhotra, who took charge earlier in December 2024, and signals a decisive shift in the central bank’s policy direction. The MPC also changed its stance from ‘neutral’ to ‘accommodative’, indicating further support may be on the way if economic conditions require.

Table of Contents

Repo Rate
Home Loan Impact: What Borrowers Should Know
Why Did the RBI Cut Rates Again

About Repo Rate

The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to Commercial banks for short-term liquidity needs. It serves as a key tool for controlling inflation and managing economic stability. When the repo rate is reduced, borrowing becomes cheaper for banks, often leading to lower interest rates on loans—including home loans—for consumers, especially for borrowers with floating-rate loans. It could also lead to better offers for new home buyers in the coming months.

Home Loan Impact: What Borrowers Should Know

If you’re repaying a home loan or planning to take one soon, here’s what this change in home loan Repo Rate means:

1. For Existing Borrowers (Floating Rate)

Your interest rate may come down, depending on how quickly your lender passes on the repo rate cut.
You could see a lower EMI or a reduction in your loan tenure if you choose to maintain the same EMI.

2. For Existing Borrowers (Fixed Rates)

You can transfer your loan account to a different bank offering lower home loan interest rates.

3. For New Borrowers

Lenders are likely to offer more competitive rates, making now a great time to explore home loan options.
This could increase affordability, especially for first-time buyers looking at affordable housing.

Why Did the RBI Cut Rates Again?

The RBI’s decision comes amid a combination of slowing growth, easing inflation, and rising global headwinds, including the recent 26% tariff by the United States on Indian exports.

India’s GDP growth for FY 24 – 25 is estimated at 6.5%, the slowest since the pandemic.
Institutions like Goldman Sachs have revised their 2025 GDP forecasts for India from 6.3% to 6.1%.
The RBI, however, remains optimistic with a growth forecast of 6.7%.

To cushion the impact, the central bank has already infused over $80 billion in liquidity through the banking system over the last two months. The April rate cut builds on the February 2025 policy, which marked India’s first RBI repo rate cut in five years—from 6.5% to 6.25%—and included a 50 basis point CRR cut to improve liquidity and credit flow.

What’s Ahead?

The RBI’s shift to an accommodative stance signals that more rate cuts could be on the table if economic pressures persist. The next MPC meeting is scheduled for June 4–6, and market watchers will be closely monitoring inflation trends, oil prices, and global trade dynamics.

Bottom Line: A Welcome Window for Home Loan Seekers

At present, repo rate is now at 6.0%, which means lower home loan interest rates for homebuyers. So whether you’re buying your dream home or refinancing an existing loan, this is a great time to explore your options.