RBI's Repo Rate Cut: A Welcome Relief For Home Loan Borrowers?
The Reserve Bank of India (RBI) cut the repo rate by 25 basis points to 6.25% on Friday, which means your home loan EMIs are likely to decrease by 1.8% on a 20-year loan tenure.
This rate cut is a big relief for home loan borrowers, who have been waiting for a reduction in interest rates for almost five years.
Your monthly EMIs will decrease with the rate cut making it easier for you to manage your finances. The total interest you pay on your loan will also decrease saving you a lion share amount of money in the long run.
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For instance, if you took a loan of Rs 50 lakh one year ago at 9% interest for 20 years, your monthly EMI would be approximately Rs 44,986.
With the rate cut, your interest rate would decrease to 8.75%, and your total interest payout would drop to approximately Rs 53.6 lakh, saving you Rs 4.4 lakh. Your loan tenure would also be shortened by 10 months.
RBI stated that the new rate cut is expected to boost economic growth, encourage spending and investment and provide relief to loan borrowers.
The repo rate cut was unanimously made by the RBI’s six-member Monetary Policy Committee (MPC) on Friday, marking the first change in the repo rate in two years.
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The repo rate, previously at 6.5%, has been reduced to boost consumption and investment, coming just a week after the Centre cut personal income tax.
RBI Governor Sanjay Malhotra cited that inflation is aligning with targets amid concerns over economic growth and signs of inflation nearing 4%.
The RBI has estimated that India’s GDP growth will be around 6.7% in the next fiscal year. The government had earlier projected a growth rate of 6.3-6.8% for 2025-26.
Sanjay Malhotra also stated that inflation has been under control since the new monetary policy framework was introduced. He added that India’s economy is doing well, but it’s not protected from global problems.
