RBI Cuts Repo Rate to 6%: What It Could Mean for You and the Economy

Posted on Wednesday, April 9th, 2025 | By IndusInd Bank

The Reserve Bank of India (RBI), in its April 2025 Monetary Policy Committee (MPC) meeting, has reduced the repo rate by 25 basis points to 6.00%. This marks the second rate cut in a row under the leadership of Governor Sanjay Malhotra, who took charge in December 2024. 

This decision comes as the central bank tries to strike a delicate balance—supporting growth without letting inflation spiral out of control. But what does this mean for you, your money, and the wider economy? 

Let’s break it down. 

RBI’s Rationale Behind the Rate Cut 

According to the official statement, the RBI based its decision on a mix of domestic and global factors: 

• Moderating inflation: Consumer price inflation has stayed within the RBI’s comfort zone of 2–6%, creating space for a policy shift. 

• Growth-oriented policy stance: Private consumption and investment activity hasn’t been too encouraging, prompting the RBI to move from a “neutral” stance to an “accommodative” one. 

• Global headwinds: Geopolitical tensions and recent U.S. trade tariffs have added pressure on India’s trade dynamics and growth outlook. 

Put simply, the RBI is giving the economy a bit of a breathing room by making borrowing cheaper and liquidity more accessible. 

How This Could Affect You 

Whether you’re repaying a loan, saving for a rainy day, or running a business—this rate cut could influence your next financial move. 

1. Borrowers 

If you’ve taken a home loan, car loan, or personal loan on a floating interest rate, this is generally good news. As banks adjust their lending rates, you could see a dip in your EMIs—though it may take a few weeks for the changes to trickle through. 

If your current loan hasn’t reflected the February rate cut either, you might want to explore refinancing or switching to a more favourable rate structure. 

2. Depositors and Savers 

On the flip side, depositors may find interest rates on Fixed Deposits (FDs) and savings products softening over the next few months. That said, how quickly and by how much banks adjust deposit rates depends on their own cost structures and liquidity needs. 

If you’ve got surplus funds and are risk-averse, this might be a good time to lock in the current rates before they head south. 

Take a look at our latest FD interest rates to plan your savings smartly. 

Sectoral Impact: A Closer Look 

Some sectors are more sensitive to interest rate movements than others. Based on expert commentary, here’s a snapshot of potential winners: 

1. Real Estate: 

Lower home loan rates can improve housing affordability and support demand. Business Standard suggests the move could help revive demand, particularly in affordable and mid-income housing. 

2. Auto Sector: 

Vehicle loans might get cheaper too, which could push up sales in the passenger and two-wheeler segments. SIAM (Society of Indian Automobile Manufacturers) has welcomed the decision, noting that it may lift consumer sentiment in a sluggish market. 

3. MSMEs: 

For small businesses, access to affordable working capital is crucial. According to SMEStreet, the rate cut could ease the credit burden and support business expansion plans. 

What to Expect Going Forward 

So, will this be the last rate cut? Most economists don’t think so—many expect the RBI to continue easing rates if inflation remains within target. 

According to Reuters, projections suggest a cumulative cut of 50 to 100 basis points over the course of 2025, depending on how domestic inflation, fiscal policy, and global economic conditions play out. The RBI’s shift to an “accommodative” stance also indicates a readiness to support growth in the near term, should external risks and weak demand persist. 

That said, actual outcomes will depend on how inflation data evolves in the coming months, and how global events—from oil prices to trade policies—impact India’s macroeconomic landscape. Markets and businesses will be watching the RBI’s next move closely. 

What You Can Do Now 

Depending on your financial goals, there are a few steps you might consider to make the most of the changing interest rate environment. 

• Loan holders may consider checking with their bank for revised interest rates or refinancing opportunities. 

• Depositors could explore fixed-income instruments that offer better yields or lock in current FD rates before revisions, if any. 

• SMEs and self-employed individuals may want to review credit requirements and check for revised lending terms from financial institutions. 

Final Thoughts 

The repo rate may sound like a technical term, but it plays a powerful role in how much we pay or earn on loans and savings. With this cut, the RBI has sent a clear signal: it wants to support growth without losing its grip on inflation. 

But like with all monetary policy decisions, the real impact will unfold gradually, depending on how banks, businesses, and global markets react. 

So, stay informed. Plan wisely. And explore the financial products best suited to your needs.