Synopsis: The RBI has cut the repo rate by 25 basis points, bringing it down to 5.25%. This move will directly impact home, auto, and personal loan EMIs, potentially making borrowing cheaper for millions of consumers.
RBI Cuts Repo Rate to 5.25%: What It Means for Your Home, Auto & Personal Loan EMI
The Reserve Bank of India (RBI) has taken a key monetary step by reducing the repo rate by 25 basis points, bringing it down to 5.25%. With this latest cut, the total repo rate reduction this year stands at 1.25%.
This decision is expected to influence loan EMIs, savings returns, and overall economic activity.
Why Is the Repo Rate Cut Important?
A repo rate cut impacts the economy in multiple ways:
- Reduces borrowing costs for banks
- Leads to lower interest rates on loans
- Boosts demand for home, car, and business loans
- Encourages industries to invest more
- Promotes job creation and economic growth
Benefits of Repo Rate Dropping to 5.25%
Home loan borrowers stand to gain the most. Since most home loans are long-term and linked to floating rates, even a small rate cut can significantly reduce EMIs and interest burden.
- EMIs go down
- Loan tenure may reduce
- Total interest paid becomes lower
How Much Will EMI Reduce on a ₹10 Lakh Home Loan?
On a ₹10 lakh home loan for 15 years:
- A 0.25% rate cut (9% → 8.75%) saves ₹150–₹250 per month.
- If banks pass on a 0.75% cumulative cut (9% → 8.25%), savings rise to ₹500–₹650 per month.
These savings increase significantly for larger loan amounts.
Which Loans Benefit the Most?
- Home loans — biggest beneficiaries (especially floating-rate loans)
- New personal loans — may become cheaper
- Auto loans — reduction depends on bank policies
- MSME loans — floating-rate loans see relief
However, fixed-rate personal loans may not be affected, as their interest rate remains unchanged.
Impact on FDs and RDs
While borrowers gain from a repo rate cut, savers may see:
- Lower interest rates on Fixed Deposits (FDs)
- Reduced returns on Recurring Deposits (RDs)
This is because banks adjust deposit rates based on borrowing costs and liquidity requirements.
📌 Key Takeaway
The RBI’s 25 bps repo rate cut to 5.25% is a major relief for borrowers. Home, auto, and personal loan EMIs may drop, making loans more affordable. However, deposit rates on FDs and RDs may decline. For homebuyers, this is an excellent time to explore refinancing or securing new loans at lower interest rates.
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