The Reserve Bank of India has delivered a major monetary policy move by cutting the repo rate by 50 basis points, bringing it down to 5.5%. This latest decision, announced after the three-day meeting of the Monetary Policy Committee (MPC), is the third straight rate cut in 2025. The committee has also shifted its stance from ‘accommodative’ to ‘neutral’, suggesting a more balanced approach moving forward. The last time the RBI made such a steep cut was during the COVID-19 crisis, underscoring the seriousness of this latest move.
RBI Governor Sanjay Malhotra explained that the rate cut was based on a detailed review of the country’s current economic conditions. Following this, the Standing Deposit Facility (SDF) now stands at 5.25%, while both the Marginal Standing Facility (MSF) rate and the Bank Rate have been adjusted to 5.75%.
The implications of this rate cut will be felt across sectors, but most noticeably by new home loan borrowers and those investing in bank fixed deposits. According to financial experts, fresh home loan applicants are likely to benefit if banks choose to pass on the cut. With the repo rate reduced, banks may lower interest rates on new loans, translating to smaller EMIs.
For example, someone taking a ₹50 lakh home loan for 20 years might see their monthly EMI drop by nearly ₹2,000. Over the entire loan term, that’s a saving of close to ₹4.7 lakh. Similarly, for a ₹30 lakh loan over the same period, borrowers could save around ₹1,176 per month. Some may even choose to keep paying the original EMI amount, which could help them close their loans faster and reduce overall interest outgo.
So far in 2025, the RBI has lowered the repo rate by a total of 100 basis points, including smaller cuts in February and April. This signals a more borrower-friendly lending environment. Experts believe this is an ideal time for people who had postponed home-buying plans to take advantage of reduced borrowing costs.
But while borrowers may celebrate, fixed deposit investors might have to brace for less encouraging news. The repo rate cut could lead to a decline in FD interest rates across tenors. Financial advisors are suggesting that those who rely on FDs, especially senior citizens, should consider locking in the current rates before banks begin revising them downward. Once locked in, the FD rate remains unchanged for the tenure of the deposit. Alternatively, post office time deposits may also offer a stable option for conservative savers.
Overall, the RBI’s unexpected move is a double-edged sword—bringing relief to borrowers while nudging savers to act quickly before returns start shrinking.
