RBI Likely to Cut Repo Rate in June 2025: What Borrowers Should Know

The Reserve Bank of India is anticipated to reduce repo rate by 25 basis points during its upcoming MPC meeting on June 6, 2025. This would be the third Rate cut in 2025, signaling the central bank’s intent to support economic expansion while ensuring inflation remains within manageable limits.

This potential rate cut holds important implications for borrowers across India—particularly those with home, car, or personal loans. In this blog, we’ll explore what a repo rate cut means, why it’s expected, and how you can prepare financially using our EMI Calculator to make smarter borrowing decisions.

What Is the Repo Rate and Why Does It Matter?

The repo rate refers to the rate on which the Reserve Bank of India (RBI) provides short-term loans to commercial banks. When the RBI lowers this rate, it often results in banks reducing their lending rates as well—making loans, mortgages, and other credit products more affordable for consumers.

For example, a reduction in the repo rate can directly influence banks to lower their lending rates, resulting in lower EMIs (Equated Monthly Installments) for both existing and new borrowers. Whether you’re planning to buy a house, finance a car, or apply for a personal loan, the repo rate plays a crucial role in determining your repayment burden.

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Why Is Another Repo Rate Cut Expected?

Several macroeconomic factors have aligned in favor of a potential rate cut:

1. Slowing GDP Growth

India’s GDP growth for FY2024–25 has moderated to 6.5%, down from 9.2% in the previous year. Despite a robust 7.4% GDP growth in Q4, the broader trend shows signs of deceleration in domestic demand and investment.

2. Controlled Inflation

Inflation remains within the RBI’s comfort zone of around 4%, giving the central bank room to maneuver policy without risking price instability.

3. Favorable Global Conditions

Global crude oil prices have softened, averaging $65–$70 per barrel, compared to $78.8 last year. Combined with predictions of an above-normal monsoon by the Indian Meteorological Department (IMD), these conditions are likely to keep food inflation in check and support rural demand.

Expert Views: What Economists Are Saying

Several economists and financial institutions support the forecast of a repo rate cut:

• Madan Sabnavis, Chief Economist at Bank of Baroda, believes the RBI will implement another 25 bps cut, citing stable inflation and a favorable liquidity situation.
• A. Prasanna from ICICI Securities emphasizes that strong Q4 growth numbers support a moderately accommodative policy stance, giving the RBI flexibility to react to future economic surprises.
• CRISIL predicts that the RBI could reduce the repo rate by up to 50 basis points during FY25 if favorable economic trends continue.

How a Repo Rate Cut Impacts Borrowers

If the expected rate cut materializes, here’s what it means for different types of borrowers:

• Home Loan Borrowers

A reduced repo rate generally leads to a decrease in floating home loan interest rates, which translates to lower monthly EMIs. This is especially helpful for long-tenure loans, where even a small interest rate change can lead to substantial savings.

Curious about how much you can save? Try our Home Loan EMI Calculator and adjust the interest rate slider to see the difference.

• Car and Bike Loans

Lower repo rates make vehicle financing more affordable. Reduced interest rates can ease the burden for first-time car buyers or those upgrading their vehicles.

Use our Car Loan EMI Calculator to plan your budget smartly.

• Personal Loans

Since personal loans typically have shorter repayment periods and higher interest rates, even a slight reduction in rates can make them more attractive. Lower EMIs may allow borrowers to take larger loan amounts or repay faster.

Explore your monthly obligations with our Personal Loan EMI Calculator.

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How to Prepare as a Borrower

Here’s how you can make the most of the expected repo rate cut:

1. Compare Loan Offers: With many banks revising their lending rates, shop around for the best deal. This small difference in rate can lead to remarkable long-term savings.
2. Use an EMI Calculator: Input different interest rates, tenures, and loan amounts to plan your finances effectively. Try our comprehensive EMI Calculator for accurate and instant estimates.
3. Consider Prepayment: If your EMIs reduce, use the surplus savings to prepay your loan. This lowers the total interest you’ll pay over the loan period.
4. Stay Updated: Keep an eye on MPC announcements and rate changes. Even after a cut, future adjustments may affect your loan terms.

Final Thoughts

A possible cut in the RBI’s repo rate may offer significant relief to borrowers by reducing EMIs and making loans more affordable. As current economic signals suggest a shift toward a more accommodative monetary policy, now is an ideal time to reassess your borrowing plans.

Whether you’re planning a new loan or refinancing an existing one, our EMI Calculator tools can help you make informed financial decisions. Stay updated with real-time data and use our calculators to see how policy changes could impact your monthly payments.

The financial landscape is evolving—make sure you’re ready to take full advantage.