RBI Rate Cut: Expect Cheaper Home and Car Loans This Festive Season, Decision Likely on October 1

Home and car loan borrowers may get a festive gift as the Reserve Bank of India (RBI) prepares to announce its monetary policy decision. The three-day RBI Monetary Policy Committee (MPC) meeting began on September 29 in Mumbai, with the outcome scheduled for October 1, 2025. If the central bank cuts interest rates, borrowers could benefit from lower EMIs and reduced loan costs.

Rate Cut So Far

Since February 2025, RBI has already reduced the repo rate by 100 basis points (1%), bringing it down from 6.5% to 5.5%. This has already made home and car loans cheaper, lowering EMIs or shortening loan tenures for existing borrowers.

For example, a customer with a ₹50 lakh home loan at 8.5% interest could save around ₹14.78 lakh if the loan tenure is reduced due to a 1% rate cut. Alternatively, reducing the EMI could save about ₹7.12 lakh over the loan tenure. The exact benefit will depend on the bank’s revised interest rates.

Potential October Rate Cut

Economists are expecting RBI to reduce rates by 25 basis points on October 1. This move could support economic growth while keeping inflation under control. SBI Research suggests that retail inflation may drop to around 1.1% in October, the lowest since 2004, partly due to GST reductions.

If implemented, the rate cut will benefit:

• Existing borrowers with reduced EMIs or shorter tenures

• New borrowers getting loans at lower interest rates

• Car loans, especially during Dhanteras and Diwali

Market and Growth Impact

RBI Governor Sanjay Malhotra will announce the policy at 10 AM on October 1, including forecasts for economic growth and inflation. The announcement will closely impact not just loans but also stock and bond markets.

Even if the rate cut is postponed, RBI may still reduce rates in December 2025, depending on economic conditions and global trade tensions.

Borrowers planning to take a home or car loan should wait for the October 1 announcement to make the most of potential rate cuts.