The Reserve Bank of India (RBI) has finally made a move that borrowers have been waiting for! For the first time since 2020, the RBI has cut the repo rate by 25 basis points, bringing it down to 6.25%. This decision, taken under the leadership of the new RBI Governor Sanjay Malhotra, aims to balance inflation control with economic growth. But how will this affect your EMIs, home loans, and overall borrowing costs? Let’s break it down.
Why Did RBI Cut the Repo Rate?
The RBI’s primary objective is to keep inflation within the target of 4% (with a band of ±2%) while also supporting economic growth. Lowering the repo rate helps boost liquidity in the market, making borrowing more affordable for businesses and individuals.
How Will It Impact Your EMIs?
If you have a home loan, car loan, or personal loan, this rate cut could bring some relief:
- New Borrowers: Banks may soon revise their lending rates, making new loans cheaper.
- Existing Borrowers: Those with floating interest rates will see lower EMIs, but only when their loan reset date arrives—typically in six to twelve months.
What Should Borrowers Do?
If you have an ongoing loan or are planning to take one, here are some steps to consider:
- Check with your lender to see when your interest rate will be adjusted.
- Compare loan offers—if your bank is slow to pass on benefits, refinancing might be a smart move.
- Consider prepaying a portion of your loan to reduce interest outgo.
Conclusion
The RBI’s decision to cut rates is a welcome relief for borrowers, potentially lowering EMIs and boosting demand for loans. Stay informed, reassess your finances, and make the most of this opportunity.
