Good news for borrowers: RBI cuts repo rate, loans likely to become cheaper
Amid concerns about a sharp rupee depreciation, the Reserve Bank of India (RBI) has cut repo rate by 25 basis points (0.25%) to 5.25 percent.
This is expected to lead to cheaper loans, including housing, auto, and commercial loans.
The RBI Governor stated that the decline in retail inflation has provided more room for the economy to revive.
India's real GDP growth forecast for FY2026 has been raised from 6.8 percent to 7.3 percent, while inflation has been lowered from 2.6 percent to 2 percent.
The RBI Governor stated that India's foreign exchange reserves stand at $686 billion, sufficient to cover 11 months of imports.
What is the Repo Rate?
The interest rate that other banks pay on money borrowed from the Reserve Bank is the repo rate.
A lower repo rate will ease pressure on banks, allowing them to reduce interest rates. This could lead to a slight reduction in monthly installments on bank loans.