Repo Rate Slashed by 50 Points in June 2025 : Here’s What It Means for Borrowers

RBI Governor Sanjay Malhotra announced the third consecutive Repo Rate cut by the RBI on June 6, 2025. The rate now stands at 5.50% and will lower the overall cost of borrowing for regular Indian citizens. Since the February policy review, the RBI repo rate has been reduced by a total of 100 basis points, with 25 basis point cuts in both February and April, followed by a sharper 50 basis point reduction in the latest announcement.

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Major Announcements Made by Sanjay Malhotra

The standing deposit facility rate and the marginal standing facility rate have been adjusted to 5.35% and 5.75%, respectively. Other than that, the central bank’s cash reserve ratio has been cut by 100 basis points, effectively injecting INR 2.5 Lakh Crore into the Indian banking system. The proportion of deposits that banks are required to maintain with the Reserve Bank of India (RBI) has now been reduced to 3%, down from the earlier level of 4%. All of this, accompanied by the RBI Repo Rate cut, will significantly impact the Indian economy.

MPC has changed its policy stance from “accommodative” to “neutral”, indicating a new balanced stance between the current inflation targets and the economy’s growth. While the RBI has retained the GDP growth projection at 6.5% for the current financial year, it has revised the inflation forecast downward to 3.7%.

What Does The RBI Repo Rate Cut Mean for Borrowers?

The sharp repo rate cut, along with the change in policy stance to “neutral”, will impact thousands of borrowers and investors directly. For home loan applicants, this repo rate cut means a direct reduction in their EMI instalments in the next repayment cycle. Borrowers can also choose to maintain the same EMI instalments, effectively reducing the loan tenure, in response to the repo rate cut impact.

Piyush Bothra, the co-founder and CFO of Square Yards, commented, “A 50-bps reduction will translate into meaningful EMI savings, improving affordability for homebuyers. It will also give developers greater confidence to move ahead with new launches, especially in the low-to-mid segments.”

Smaller businesses will also boom, given the lower cost of working and fixed capital with reduced interest rates. Due to the repo rate cut effect, investors in short-term fixed deposits (1 to 3 years) may see reduced expected returns, leading some to explore longer-term investment alternatives. The reduction in CRR allows banks to maintain lower reserves, increasing their capacity to approve more loan applications and encouraging greater credit demand among citizens.

With interest rates reduced, borrowers may seek financial advice to explore strategies such as balance transfers or adjusting loan tenures.