The Reserve Bank of India (RBI) has decided to cut the repo rate by 25 basis points ( bps) RBI Governor Sanjay Malhotra stated that the committee voted unanimously to cut repo rate. "The MPC (Monetary Policy Committee) voted unanimously to reduce the policy repo rate by 25 basis points to 5.25% with immediate effect," announced RBI Governor.For borrowers whose loans are linked to the repo rate through external benchmark-linked lending rates (EBLR), EMIs will reduce due to rate cut. Those with loans under older regimes, such as the base rate or MCLR, may want to evaluate whether switching to a repo-linked loan could offer better transparency and faster rate transmission going forward.
For individuals repaying home loans, the RBI’s decision provides immediate relief. Since most housing loans are now tied to external benchmarks such as the repo rate, any hike would have directly translated into higher EMIs. A rate cut means that existing borrowers will likely face a cut in their monthly instalments."A 25 basis point rate cut at this stage will meaningfully support homebuyer sentiment and improve affordability across categories. Over the past few quarters, demand has remained resilient despite elevated prices, and a reduction in borrowing costs will give fence sitters the confidence to move ahead with their purchase decisions.
Governor Malhotra stated that inflation has eased in Q1 FY27. He added that changes in income tax provisions for FY 2026 have also boosted economic growth. The decision to cut the repo rate was aimed at providing stronger support to this growth momentum. Inflation has fallen significantly, and it is expected to remain below the earlier projections. Additionally, he noted continuous improvements in manufacturing activity.The RBI holds six bi-monthly policy meetings each financial year to assess interest rates, liquidity conditions, inflation trends, and the broader macroeconomic environment.