RBI cuts repo rate by 50 basis points
RBI Cuts Repo Rate By 50 Basis Points To 5.5% : The RBI reduces the repo rate to 5.50%, marking a total cut of 100 basis points in 2025. With inflation at 3.16%, RBI aims to support India’s economic growth. The Reserve Bank of India (RBI) cut its key repo rate by a larger-than-expected 50 basis points to 5.50%, RBI governor Sanjay Malhotra announced on Friday after the Monetary Policy Committee (MPC) meeting.
This was a third consecutive reduction, as muted inflation provided space for policymakers to focus on supporting economic growth.
It has now cut rates by 100 basis points in 2025, starting with a quarter-point reduction in February, its first cut since May 2020. It made a similar-sized cut in April.
Inflation has softened significantly, Sanjay Malhotra said, adding that there is comfort on inflation aligning with the central bank’s target of 4%. Core inflation is also expected to remain benign.
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Economic growth will get support
Announcing the repo rate cut, Reserve Bank of India’s Governor Sanjay Malhotra said that this move will support economic growth. He further said that India is continuously becoming a favorite destination for investment. India’s foreign exchange reserves are also continuously increasing and it has currently reached 691.5 billion dollars. Apart from this, while sharing another important information, he said that in view of the economic situation, RBI has changed the stance of its monetary policy strategy from accommodative to neutral. This means that now the Reserve Bank will not take any aggressive decision regarding decreasing or increasing the repo rate.
Repo rate decreases loan EMI.
Repo rate is directly connected to the customers taking bank loans. When it decreases, the loan EMI decreases and when it increases, it increases. Actually, repo rate is the rate at which the central bank of a country lends money to commercial banks in case of any shortage of money. Repo rate is used by monetary authorities to control inflation.
The RBI MPC meeting started on June 4 and its results were announced today on June 6. Even before the latest repo rate cut, relief was given in the last two meetings of this year. Earlier in the meeting held in February, the repo rate was reduced by 0.25 percent, after which it came down from 6.50% to 6.25%. So after this, in the first MPC meeting of FY26 held in April, it was once again reduced by 25 basis points to 6% and now the Reserve Bank has given a big gift to the loan taking customers by imposing a hat-trick of Repo Rate Cut.
How much will the EMI decrease on a loan of Rs 50 lakh?
Suppose you have taken a home loan of Rs 50 lakh from a bank for 30 years and in return you are paying 9% interest, then your monthly EMI will be Rs 40,231. On the other hand, after the reduction of 50 basis points in the repo rate of RBI, this EMI will decrease to Rs 38,446. That is, there will be a reduction of Rs 2000 in the monthly EMI .
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