Home loan and auto loan rates in India are likely to drop soon.
In the recent RBI Monetary Policy Committee (MPC) meeting, the repo rate—which affects bank loan interest rates—was cut by 50 basis points or 0.50%.
RBI Governor Sanjay Malhotra shared the decisions after the three-day MPC meeting. Under his leadership, the MPC has met three times and cut the repo rate each time.
Repo rate falls to 5.50% in six months
In the February and April 2025 meetings, the repo rate was reduced by 25 basis points each time.
This means the repo rate has fallen by a total of 1% in six months, now standing at 5.50%.
The RBI Governor hopes banks will pass this cut on to customers.
Loan EMI Comparison (₹20 Lakh loan for 20 years)
| Description | Before Cut | After 0.5% Cut | Benefit |
|---|---|---|---|
| Loan Amount | ₹20 Lakh | ₹20 Lakh | — |
| Tenure | 20 years | 20 years | — |
| Interest Rate | 8% | 7.5% | 0.5% |
| EMI | ₹16,729 | ₹16,112 | ₹617 |
| Total Interest | ₹20.14 Lakh | ₹18.66 Lakh | ₹1.48 Lakh |
| Total Payment | ₹40.14 Lakh | ₹38.66 Lakh | ₹1.48 Lakh |
Note: EMI and interest figures are approximate and may vary by bank.
What’s next?
After this one-time 0.50% cut, loan rates for home loans, auto loans, personal loans, and other bank loans are expected to fall rapidly.
Although RBI cut the repo rate by 0.50% in February and April, banks have only lowered loan rates by around 0.17% so far.
This means banks have not fully passed the benefits to customers yet. But with this latest cut, more rate drops should reach the public.
What is the repo rate?
The repo rate is the interest rate at which commercial banks borrow money from RBI for short-term needs.
Banks use this money to give loans to customers. So, when RBI lowers the repo rate, loans become cheaper; when it rises, loans become costlier.
Lower loan rates are expected to increase demand for homes and vehicles, which will help the economy grow.
Economic growth expected to speed up
Governor Malhotra said this 0.50% cut will release an extra ₹2.5 lakh crore in the banking system for loans.
Experts see this cut as a sign from RBI that the government wants faster economic growth.
Inflation may ease
Globally, growth might slow after the US started a trade war, but India’s economy is expected to grow at 6.5%.
The RBI Governor said India’s growth rate for 2025-26 will be 6.5%, making it the fastest-growing economy in the world for the third year in a row. He also noted inflation will have less impact this year.
