RBI Repo Rate: Following the end of a three-day policy meeting, the Reserve Bank of India’s (RBI) monetary policy committee (MPC) is anticipated to lower the repo rate on Friday. Once the banks give their customers the benefit of the rate reduction, this should further lower your home loan EMI.

Notably, after almost five years, the RBI lowered the repo rate by 25 basis points to 6.25 percent on February 7. Following the initial rate cut in 2025, there was a second rate cut of 25 basis points on April 9.

Therefore, the repo rate will drop below 6 percent if the MPC cuts rates for the third time. Thus, it would seem that the rate-cut cycle that began earlier this year will last for a while longer. Undoubtedly, this will result in reduced interest rates for borrowers on their house loans; however, would this also translate into lower interest rates on personal loans?

Repo Rate Cut Off – Lower Lending Rates?
When banks borrow against government assets, they are required to pay the RBI the repo rate, which is an interest rate. Therefore, banks can afford to lend more at lower rates when they can obtain loans at a lower interest rate.

Have banks responded to past rate cuts?
There is no general rule stating that banks must lower their repo rates by the same amount that the RBI does.

Nevertheless, following the prior rate reductions, several banks lowered their lending rates. For example, in April, Punjab National Bank, Indian Bank, Bank of Maharashtra, and State Bank of India (SBI) lowered their lending rates.

Following the rate drop in April, UCO Bank and Bank of India likewise lowered their lending rates.
Also Read: Telangana Youth Flock to Category 4 Loans Under Rajiv Yuva Vikasam

Why is the MPC eyeing another rate cut?
At this point, the only things circulating are expectations and projections. A 50-basis-point rate drop was forecast in the SBI Research report. The report has linked this to waning domestic liquidity and worries about the Indian economy’s financial viability.

“Financial stability and domestic liquidity issues have subsided. The analysts at SBI Research stated in their study that inflation would likely remain within the tolerance range.

Will personal loan rates drop too?
The only loans that could be impacted are those with variable interest rates. These consist of auto and house loans. Personal loans will not experience a decrease in interest rates because they are disbursed at a set rate of interest. The interest rates for upcoming personal loans, however, can vary somewhat.
Also Read: Personal Loans: 4 Things You Should Consider

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