India’s financial landscape witnessed a pivotal shift in April 2025 as the RBI repo rate was reduced to 6.00%, marking the second consecutive rate cut this year. This policy decision by the Reserve Bank of India (RBI) has triggered a ripple effect across borrowers, lenders, and investors. But what does this mean for you as a borrower? Let’s dive into how Indian borrowers are responding to this significant monetary change.
Table of Contents
📉 What Is the RBI Repo Rate?
The RBI repo rate is the rate at which the Reserve Bank of India lends money to commercial banks in the event of a shortfall of funds. It’s one of the most critical tools in the RBI’s monetary arsenal, used to control inflation, regulate liquidity, and stimulate economic growth.
When the repo rate decreases, borrowing becomes cheaper for banks. Ideally, this encourages banks to pass on the benefit to customers by reducing interest rates on loans such as home loans, car loans, and personal loans.
🗓️ A Quick Look at Recent Repo Rate Changes
- December 2024 – RBI held the repo rate steady at 6.50%
- February 2025 – RBI cut the rate by 25 basis points to 6.25%
- April 2025 – Another 25 bps cut brought the repo rate to 6.00%. Please refer the official RBI website for current repo rate.
The Monetary Policy Committee (MPC) unanimously voted for the April cut, citing a sharp fall in inflation to 3.34% and a need to support India’s growing but uneven economy.
🧠 Why RBI Cut Repo Rate
India’s core inflation has steadily declined, thanks to stable food prices and moderate fuel costs. At the same time, economic indicators like manufacturing output and exports showed sluggish growth. To inject liquidity and encourage spending, the RBI adopted a more accommodative policy stance.
This shift gives banks more confidence to lend, boosts consumer spending, and supports small and medium-sized enterprises (SMEs) that rely on credit.
🏦 How Borrowers Are Responding
The response from borrowers to the 6.00% repo rate has been swift and strategic:
1. Home Loan Refinancing on the Rise
Borrowers with existing high-interest home loans are actively seeking refinancing options. With banks reducing their repo-linked lending rates (RLLR), there’s a visible uptick in loan transfer applications. For instance:
- Indian Bank lowered its RLLR from 9.05% to 8.70%
- Bank of India slashed its RLLR from 9.10% to 8.85%
This means borrowers can save thousands annually on long-term EMIs.
2. Surge in Personal and Car Loan Applications
Lower interest rates make credit more affordable. As a result, many borrowers are seizing the opportunity to take personal and car loans for planned purchases that were postponed due to higher rates last year.
Lenders have also introduced festive offers and zero processing fee campaigns to capitalize on rising demand.
3. Prepayments and Loan Restructuring
Some borrowers are using the rate cut as a chance to prepay their EMIs or reduce loan tenure. Others are renegotiating terms with banks, especially if their loans were fixed or semi-fixed rate-based.
In short, Indian borrowers are becoming financially smarter, leveraging the RBI’s decision to improve their credit health.
🔍 Sector-Wise Borrower Impact
Let’s examine how the new repo rate is influencing different segments:
🏠 Real Estate
Lower home loan interest is a win for the housing sector. First-time buyers are more confident, and developers are seeing increased footfall in metro cities. Affordable housing projects in Tier 2 and Tier 3 cities are witnessing renewed interest.
🚗 Auto
With car loans becoming cheaper, automakers are hopeful for a boost in demand. Maruti Suzuki and Tata Motors have already rolled out promotional finance schemes tied to repo rate changes.
📚 Education
Parents planning for higher education are opting for education loans thanks to improved lending terms. Banks are also easing documentation for students heading abroad.
📈 What Experts Are Saying
According to analysts at Nomura India and CRISIL, the RBI’s move aligns with global central banks adopting a pro-growth policy stance. They predict another potential cut in the next quarter if inflation remains in check.
Sonal Varma, Chief Economist at Nomura, said:
“The RBI repo rate reduction to 6.00% reflects the central bank’s shift to proactive monetary easing. This should ease loan burdens and stimulate capital spending.”
📉 Expert Analyses on RBI’s Repo Rate Cut
1. Capital Economics – Anticipation of Further Rate Cuts
Shilan Shah, Deputy Chief Emerging Markets Economist at Capital Economics, stated that the RBI’s shift to an accommodative stance suggests the possibility of additional rate cuts. He noted that with inflation under control and global uncertainties persisting, the central bank might lower the repo rate further, potentially reaching 5.50% by the end of the year.
2. ANZ Research – Forecasting Two More Rate Cuts
ANZ Research anticipates two additional rate cuts by August 2025. They highlight that the RBI’s accommodative policy stance aims to support economic growth amid challenges such as U.S. tariffs and global trade uncertainties.
3. Moody’s Analytics – Adjusted Growth Forecast
Moody’s Analytics revised India’s 2025 GDP growth forecast downward by 30 basis points to 6.1%, citing potential economic effects of U.S. tariffs. Despite this, they suggest that the RBI’s rate cuts and domestic tax incentives could help mitigate the impact and support growth.
4. Reuters – Consensus on Further Rate Cuts
A Reuters report indicates that several economists expect further monetary easing, with predictions of two to three rate cuts in 2025. They attribute this to factors such as a forecasted above-normal monsoon, which could stabilize food prices, and global influences like tariff policies and commodity prices.
📊 Repo Rate Cut: A Borrower’s Checklist
If you’re a borrower, here’s what you should do now:
- Check your loan type: Fixed-rate loans won’t immediately reflect changes.
- Compare rates: Use aggregator sites to find banks with the lowest RLLR.
- Consider refinancing: Shift your loan if it makes long-term financial sense.
- Increase EMI or reduce tenure: Both options help save on interest over time.
- Negotiate with your lender: Banks are often open to restructuring in a rate-cut environment.
🔮 What’s Next for Borrowers?
While the 6.00% repo rate has provided temporary relief, borrowers must remain cautious. Inflation could spike again due to geopolitical tensions or rising crude oil prices. Also, the fiscal budget’s impact on interest-sensitive sectors will become clearer in the coming months.
For now, however, it’s a great time to restructure finances, make planned purchases, or simply enjoy lower monthly EMIs.
✅ Final Thoughts
The RBI’s latest move to bring the repo rate down to 6.00% is a clear message: It’s time to grow the economy and make credit more accessible. Indian borrowers have responded with action — refinancing loans, applying for credit, and making bold financial moves.
If you’re a borrower, this is your moment to think smart, act fast, and capitalize on a policy wave that favors you.
FAQs
Has RBI cut repo rate by 25 basis points??
RBI cuts repo rate by 25 basis points, switches to accommodative stance to spur growth. Slashing policy rates for the second time in a row, the Monetary Policy Committee of the Reserve Bank of India today unanimously announced a reduction of 25 basis points in the policy repo rate, bringing it down to 6 percent.
What are current RBI rates?
After two consecutive cuts, the rates are now at 6%, and the RBI has cited that the retail inflation is well within the target area of 4% and the March inflation is expected to be in line with the target rate.
Has SBI reduced interest rates?
SBI, India’s largest lender, reduced its Repo-Linked Lending Rate (RLLR) by 25 basis points to 8.25%. It also slashed its External Benchmark-Based Lending Rate (EBLR) by 25 basis points to 8.65%. The revised rates came into effect from April 15, 2025, and apply to both new and existing borrowers.
What is the effect of RBI rate cut on stock market?
RBI’s second rate cut signals game on: What it means for stock market investors. The RBI cut repo rates by 25 bps to 6% and shifted to an accommodative stance, signalling more cuts ahead to support growth amid global uncertainty. Markets were subdued; gold loan NBFCs fell on tighter norms.
