According to various reports, Reserve Bank of India (RBI) might give more relief to the middle class by further cutting interest rates. The rate cutting may vary upto even 50 basis points. The bank has recently reduced it bey 25 basis points. Reports also suggest that the bank plans to reduce the interest rate by a total of 75 basis points in the year 2025. If there is a reduction of 50 basis points, then not only it will be cheaper to get a loan but there will also be a reduction in EMI.
According to The Economic Times, a report released by Bank of Baroda indicates that the RBI has initiated a phase of rate cuts. While more reductions are anticipated, the exact timing remains uncertain. The report suggests that once the RBI begins cutting rates, further reductions are likely to follow.
It said “As RBI embarks upon the rate cut cycle, it can be expected that more cuts are also on the cards, while the timing can be debatable. Cumulatively, we are pricing in 75bps cut in this calendar year”.
After five years, the RBI has finally cut the repo rate by 25 basis points to 6.25%, bringing some relief to borrowers. The decision, taken unanimously by the Monetary Policy Committee (MPC), also lowered the Standing Deposit Facility (SDF) rate to 6% and the Marginal Standing Facility (MSF) rate to 6.5%. However, despite the rate cut, the RBI maintained a “neutral” policy stance, signaling a cautious approach to future changes.
How Much Cut Can Be Expected This Year
According to the report, the Reserve Bank can cut 75 basis points in this calendar year. RBI has recently cut the repo rate by 25 basis points to 6.25 percent. The repo rate has been cut for the first time in 5 years. This cut was decided in the meeting of the Monetary Policy Committee (MPC).
When To Expect The Cut?
The next meeting of the RBI’s Monetary Policy Committee (MPC) is scheduled for April, where a decision on a potential repo rate cut could be discussed. According to the report, inflation is projected to be 4.4% in Q4 of FY25 and 4.5% in Q1 of FY26. However, inflationary pressures are expected to ease from Q2 of FY26, potentially paving the way for further interest rate cuts.
What Is Repo Rate?
The repo rate is the rate at which the Reserve Bank lends money to other banks. If the Reserve Bank lends money at a lower rate, then banks also provide loans to customers at a lower rate. This includes home loans, car loans, personal loans etc. The middle class gets a big benefit from the reduction of repo rate, because it reduces the burden of EMI. On the other hand, liquidity also increases in the market.
