RBI Repo Rate Cut What It Means for Your Personal Loan EMI

 

RBI Slashes Repo Rate by 50 bps in June 2025 MPC Meet

        In a significant move to support economic growth, the Reserve Bank of India (RBI) cut the repo rate by 50 basis points (bps) on June 6, 2025. With this latest reduction, the repo rate now stands at 5.5%, down from 6%, marking the third consecutive rate cut since February 2025. Overall, the RBI has slashed the repo rate by 100 bps (1%) in just four months—a clear signal of its accommodative policy stance transitioning to neutral amid stable inflation levels.

    Alongside the repo rate, the Cash Reserve Ratio (CRR) was also trimmed by 100 basis points, to be implemented in four equal tranches across September to November 2025. This dual policy easing aims to inject liquidity into the banking system and stimulate credit growth, particularly in the retail loan segment.

 

        The repo rate—short for repurchase rate—is the interest rate at which the RBI lends money to commercial banks against government securities. When the RBI cuts the repo rate, it effectively reduces the cost of borrowing for banks. This encourages banks to lend more at lower interest rates to businesses and individuals alike.

    A lower repo rate is a monetary tool used to boost consumer spending and investments, especially during periods of low inflation and moderate growth. The latest cut comes amid a CPI inflation rate of 3.16% in April 2025, giving the RBI ample room to ease rates without stoking price pressures.

 

Repo Rate Timeline Since February 2025

• February 2025: Repo rate cut from 6.5% to 6.25%
• April 2025: Further cut to 6.0%
• June 2025: Latest 50 bps cut to 5.5%

This 100-bps reduction in just over four months marks the most aggressive easing cycle by the RBI in recent years.

 

Impact on Personal Loan Interest Rates

One of the most direct impacts of a repo rate cut is seen in the interest rates offered on personal loans. Since banks now have access to cheaper funds, they are likely to pass on the benefit to borrowers through lower lending rates.

Here's the same example presented in a clear, easy-to-understand table format:

Details	At 12% Interest Rate	At 11% Interest Rate	Savings
Loan Amount	₹10,00,000	₹10,00,000	—
Loan Tenure	5 years (60 months)	5 years (60 months)	—
Monthly EMI	₹22,244	₹21,742	₹502 per month
Total Amount Payable	₹13,34,667	₹13,04,545	₹30,122
Total Interest Paid	₹3,34,667	₹3,04,545	₹30,122

 

    While personal loans see immediate benefits, the impact of the repo rate cut isn’t limited to them. Other loan categories like:

• Home loans (especially floating rate ones)
• Car loans
• Education loans
• Business loans

are also expected to see rate reductions in the coming weeks as banks adjust their marginal cost of funds-based lending rate (MCLR) or link their products directly to the repo rate.

The primary reason is benign inflation and the need to support economic growth.

• CPI inflation for April stood at 3.16%, well below the RBI’s medium-term target of 4%.
• RBI’s forecast for FY 2025–26 inflation is 3.7%, within the acceptable 2–6% tolerance band.

    With price stability maintained, the RBI found room to stimulate demand by cutting rates and injecting liquidity via CRR reductions.

    However, RBI Governor Shaktikanta Das made it clear that the central bank has now shifted its stance to ‘neutral’, signaling that further rate cuts will depend on upcoming inflation data and economic performance.

    Not likely in the near term. While the current macroeconomic environment supports rate easing, the space for additional cuts is limited. The RBI has already used up a substantial portion of its monetary arsenal, and any future changes will be data-dependent.

Factors the RBI will monitor include:

• Trends in retail inflation (CPI)
• Global crude oil prices
• Monsoon progress and impact on food prices
• Overall GDP growth rate

 

    If you are planning to take a personal loan, now is a good time. Since the RBI has already implemented significant rate cuts, and banks are expected to start passing on the benefits, you may see lower EMIs if you apply soon.

    Further cuts seem unlikely in the immediate future, and waiting too long could expose you to rate hikes if inflation rises again or if RBI decides to reverse its policy stance.

Do note:

• Compare interest rates across multiple lenders
• Choose between fixed and floating interest rates
• Keep an eye on processing fees and other charges

 

    The RBI’s decision to cut the repo rate by 100 bps since February 2025 is a significant step in making credit more affordable. With banks likely to respond with lower personal loan rates, consumers stand to benefit through reduced EMIs and overall interest savings.

    As inflation remains within the RBI’s comfort zone, the current lending environment is favorable for new borrowers. Whether it’s a personal loan for a wedding, travel, education, or any other need—this could be the right time to borrow smartly.