RBI Cuts Repo Rate By 50 bps For Third Time In A Row, Shifts Policy Stance To Neutral! Check How it Will Impact Home Loan Buyers

The Reserve Bank of India cut the repo rate by 50 basis points to 5.50% on Friday, marking its third straight cut in 2025. The move followed the Monetary Policy Committee meeting as inflation cooled faster than expected.

With this, the RBI has reduced rates by a total of 100 basis points this year—25 bps in February, 25 bps in April, and now 50 bps. The SDF and MSF rates were also cut by 50 bps. RBI Governor Sanjay Malhotra said the cuts are meant to support growth while inflation remains under control.

Inflation Slows, RBI Steady On Growth

Retail inflation hit a six-year low of 3.16% in April, well below the RBI’s target of 4%. The central bank now expects inflation to average 3.7% this year, down from its earlier estimate of 4%. Forecasts for Q1 and Q2 were lowered to 2.9% and 3.4%.

Malhotra said, “There is comfort on inflation aligning with the central bank’s target.” He also noted that core inflation remains stable.

India’s economy is still showing strength. GDP grew 7.4% in the January-March quarter. The RBI has kept its growth forecast for FY26 at 6.5%, with quarterly estimates ranging from 6.4% to 6.7%.

RBI Policy Shift And What It Means

The RBI has now moved its stance from “accommodative” to “neutral.” Malhotra said, “There is now very little policy room to support growth,” indicating that further cuts are unlikely unless needed.

He added that the global economy remains fragile, with many international agencies lowering growth expectations. Still, Malhotra said India stands out as a place of “strength, stability and opportunity.”

He also said India offers a “3D” advantage to investors - demographics, digitalisation, and domestic demand.

Home Loan Borrowers May See Relief

The rate cut is likely to bring some good news for home loan borrowers. With banks expected to reduce lending rates in response to the lower repo rate, EMIs on home loans could drop slightly. Those with floating interest rates will benefit the most, though the extent and speed of rate transmission may vary across lenders. Borrowers are advised to keep a close watch on their bank’s announcements in the coming days.