RBI Cuts Repo Rate by 0.50% – Home and Car Loan EMIs to Drop, Ideal Time to Lock in FD Returns

RBI Cuts Repo Rate by 0.50% – Check How Much EMI You Save on Home, Car & Personal Loans, and Why You Should Consider FDs Now

In a major relief for borrowers, the Reserve Bank of India (RBI) has announced a 50 basis point (0.50%) cut in the repo rate on June 6, 2025, during the latest Monetary Policy Committee (MPC) meeting. This marks the third consecutive cut in 2025, bringing the total repo rate reduction this year to 1%. As a result, home, auto, and business loans are expected to become significantly cheaper, directly benefiting both new borrowers and existing customers with floating rate loans.

📉 Repo Rate Cut Impact: Lower EMIs Ahead

The current repo rate cut means a drop in the interest rates that banks charge on loans linked to external benchmarks. Since most retail loans like home loans and car loans are now repo rate-linked, any change in this rate directly affects monthly EMIs.

Let’s see how this reduction translates into actual EMI savings:

🏠 Home Loan Example – ₹25 Lakh Loan

• Loan Amount: ₹25,00,000

• Tenure: 20 years

• Old Interest Rate: 8%

• Old EMI: ₹20,911/month

➡️ After a 0.5% rate cut (new interest rate 7.5%):

• New EMI: ₹20,140

• Monthly Savings: ₹771

• Total Interest Saved Over 20 Years: ₹1.85 lakh (approx)

🚗 Car Loan Example – ₹8 Lakh Loan

• Loan Amount: ₹8,00,000

• Tenure: 7 years

• Old Interest Rate: 9.10%

• Old EMI: ₹12,897/month

➡️ After rate cut (new interest rate 8.60%):

• New EMI: ₹12,642

• Monthly Savings: ₹255

• Total Interest Saved Over 7 Years: ₹21,420 (approx)

📌 What About Personal Loans?

Personal loans are typically offered at fixed interest rates, meaning the current borrowers won't benefit directly from this repo rate reduction. However, for new personal loan seekers, banks might revise their offerings downward in response to improved liquidity and cheaper funding costs.

🏦 FD Investors—Act Quickly!

While rate cuts are good news for borrowers, Fixed Deposit (FD) investors may see falling returns soon. With the repo rate coming down by 1% in total this year, banks are likely to reduce FD interest rates in the coming weeks. If you're planning to invest in an FD, this might be the right time to lock in higher interest rates before banks revise them downward.

📊 Market Outlook and Why RBI Cut Rates

RBI’s decision comes amid concerns over domestic liquidity and the need to support economic growth. With inflation appearing under control, the central bank is using monetary easing to:

• Boost consumption

• Support MSMEs and industries

• Improve loan affordability

Economists believe that this rate cut trend could continue if inflation remains within manageable levels and GDP growth requires stimulus.

📌 Conclusion: A Mixed Bag for Borrowers and Savers

• Good news for borrowers – EMIs on home, car, and business loans will fall, saving thousands in the long run.

• Time-sensitive alert for investors – Lock in FDs at current rates before banks adjust to RBI’s decision.

Stay tuned to your bank’s announcements, and use online EMI calculators to see how this affects your current or upcoming loans.