Will RBI Cut Repo Rate for the Third Time? Interest Rates May Dip Below 6%, EMI Relief Likely

RBI May Cut Repo Rate for the Third Time—Could Interest Rates Fall Below 6%?

The Reserve Bank of India (RBI) is expected to take a major decision on Friday regarding a possible third repo rate cut in 2025. Following a three-day meeting of the Monetary Policy Committee (MPC), all eyes are now on whether the central bank will bring the benchmark lending rate down again, possibly below 6%, a move that could bring further relief to home loan borrowers through lower EMIs.

Currently, the repo rate stands at 6.25%, following two consecutive 25 basis point cuts—one on February 7 and another on April 9 this year. If the committee approves a third cut, the repo rate could drop below 6% for the first time in years, possibly triggering a fresh round of interest rate reductions by banks.

🔍 Why Repo Rate Cuts Matter

The repo rate is the rate at which the RBI lends money to commercial banks against government securities. When this rate decreases, banks can borrow funds at a lower cost. Consequently, they may pass on this benefit to customers by reducing interest rates on loans, especially floating-rate loans like home loans and auto loans.

Although there is no compulsion for banks to mirror the repo rate cuts exactly, several leading institutions have already responded by trimming their lending rates after previous RBI decisions.

🏦 Banks That Have Already Reduced Rates

After the April repo rate cut, several major Indian banks responded swiftly:

• State Bank of India (SBI)

• Bank of Maharashtra

• Indian Bank

• Punjab National Bank (PNB)

• UCO Bank

• Bank of India

These banks slashed their interest rates on various loans, passing on the benefits to customers—especially those with floating rate home loans.

📉 Why Another Rate Cut Is Being Considered

Market experts and economists are increasingly optimistic about another round of repo rate reduction. A recent SBI Research report forecasts a potential cut of 50 basis points, citing:

• Declining domestic liquidity

• Stabilizing financial conditions

• Controlled inflation levels

As inflation seems to be moving within the RBI’s comfort zone, and liquidity concerns have slightly eased, the central bank may feel encouraged to continue its easing policy to further support economic growth.

💸 Will Personal Loan Interest Rates Also Go Down?

Borrowers often wonder whether a repo rate cut affects personal loans. The answer lies in the loan type:

• Floating-rate loans (e.g., home loans, auto loans) do benefit from repo rate cuts.

• Fixed-rate loans, like most personal loans, remain unaffected by repo rate changes.

However, new personal loan seekers might get better deals as banks revise lending rates based on the broader interest rate environment.

📌 Conclusion: What Should Borrowers Expect?

If the RBI slashes the repo rate again, interest rates could dip below 6%, a level not seen in recent years. This could mean further reduction in EMIs for floating-rate borrowers and possibly cheaper new loans for both individuals and businesses. Existing borrowers should stay informed and consider options like refinancing if significant rate drops occur.