Today, on 6 June 2025, the Reserve Bank of India (RBI) has made a big announcement. RBI has reduced its key lending rate, i.e. repo rate, by 50 basis points (bps) to 5.5%. This is RBI’s third consecutive rate cut this year, the aim of which is to boost economic growth and keep inflation under control.
What is the repo rate?
The repo rate is the rate at which RBI gives short-term loans to banks. When RBI reduces the repo rate, it becomes cheaper for banks to borrow money, which affects your loans and EMIs.
Today’s announcement by RBI: Key Highlights
Repo Rate Cut: After a 50 bps cut, the repo rate is now 5.5%.
CRR Cut: The Cash Reserve Ratio (CRR) has also been reduced by 100 basis points, now standing at 3.5%.
Policy Stance: RBI has made its policy stance “neutral”, which was earlier “accommodative”.
Its effect on your remis
If you have a home loan or car loan, then this rate cut is good news for you. The cut in repo rate has a direct impact on the interest rate of your loan, which can reduce your monthly EMIs.
Example: On a home loan of ₹40 lakh, if the interest rate falls from 9% to 8.5%, you can save up to ₹3.5 lakh in interest.
Trying to boost economic growth
This step of RBI is to boost economic growth. RBI has kept the GDP growth forecast for FY26 at 6.7%. Lower interest rates will provide cheap finance to businesses, which will increase investment and consumption.
Control on Inflation
RBI has kept the CPI inflation forecast for FY26 at 4.2%. Normal monsoons and stability in global commodity prices are expected to keep inflation under control.
Market Reaction
Rate-sensitive sectors such as banking, real estate, and auto stocks saw gains. The Nifty 50 and the broader Sensex also gained 0.7% and 0.6%, respectively.
What should that do for you?
Home Loan Borrowers: You can avail the benefit of lower interest rates by contacting your bank.
Investors: You can look for investment opportunities in the real estate and auto sectors.
Savers: Fixed deposit rates may be affected, so consider alternative investment options.