RBI Slashes Repo Rate To 5.5%: What It Means For Your Home Loan EMIs And FD Return (Screenshot: X/RBI)

The Reserve Bank of India (RBI) on Friday cut the repo rate by 50 basis points (bps), bringing it down to 5.5%. The central bank also lowered the cash reserve ratio (CRR), aiming to inject greater liquidity into the banking system. These decisions came after a three-day meeting of the Monetary Policy Committee (MPC).

Post Monetary Policy Press Conference by Shri Sanjay Malhotra, RBI Governor- June 06, 2025 at 12 noon. https://t.co/2qs2DZ4yfo

— ReserveBankOfIndia (@RBI) June 6, 2025

RBI Governor Sanjay Malhotra announced the higher-than-expected rate cut, signalling the central bank’s proactive approach to supporting domestic growth. With this move, the RBI has reduced the repo rate by a cumulative 100 bps so far in 2025, with 25 bps cuts each in February and April.

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“This rate cut is a strong signal that the central bank is committed to sustaining economic momentum amid global headwinds,” said Sanjay Malhotra. “The RBI has retained its economic growth forecast at 6.5% for FY2025,” he added.

Boost for Home Loan Borrowers

The repo rate cut is expected to bring substantial relief to home loan borrowers, particularly those taking new loans. If banks pass on the benefit, borrowers could see meaningful reductions in their monthly EMIs.

Annuj Goel, Managing Director at Goel Ganga Developments, told Mint, “The RBI’s 50 bps cut is audacious and visually bold in its intent. If you’ve taken a ₹50 lakh home loan for 20 years, you could save around ₹1,960 per month, amounting to nearly ₹4.7 lakh over the loan’s lifetime.”

For a ₹30 lakh loan over the same period, the monthly EMI may drop by approximately ₹1,176. Aman Gupta, Director at RPS Group, told Mint, “Borrowers now have a choice: reduce their EMIs or maintain current payments and shorten their loan tenure, which would result in higher interest savings.”

Experts say that cumulative rate cuts in 2025 are especially beneficial for those who postponed buying homes earlier. “With a total 100 bps repo rate cut this year, a ₹50 lakh loan over 20 years could see EMI savings of ₹3,800 to ₹4,000 per month. This is a great time for potential homebuyers,” said Pankaj Mathpal, MD & CEO at Optima Money Managers, speaking to Mint.

While the rate cut supports borrowers and credit growth, it comes as a setback for fixed deposit (FD) investors. As banks adjust to the new repo rate, returns on fresh FDs are expected to decline.

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“The repo rate cut will affect FD rates negatively,” Mathpal told Mint. “Banks are likely to reduce interest rates across all tenors. Senior citizens and others relying on FDs should consider locking in current rates now, as existing FDs remain unaffected.”

He also suggested that investors explore alternatives such as time deposits under post office small savings schemes, which may offer better returns amid falling bank FD rates.