RBI Repo Rate Cut April 2025: Lower EMIs, Investment Insights & Market Outlook

RBI Monetary Policy | The Reserve Bank of India (RBI) on April 9, 2025, under the leadership of new RBI Governor Sanjay Malhotra, cut the repo rate by 25 basis points (bps) to 6%. This decision comes as no surprise, as many market watchers had expected this reduction.

This repo rate cut marks the second consecutive reduction by the central bank, aimed at bolstering growth in the face of global economic uncertainties. The previous cut in February 2025 was the first in five years.

Along with the rate cut, the RBI also shifted its policy stance from ‘neutral’ to ‘accommodative’. But what does this mean for investors, particularly home loan borrowers? Let’s break it down.

What is the Repo Rate & Why Does It Matter?

The repo rate is the interest rate at which the RBI lends money to commercial banks. When the repo rate is lowered, it generally leads to cheaper borrowing costs for consumers and businesses. This is because commercial banks are able to borrow money from the RBI at a lower cost and, in turn, pass on these savings to their customers.

In addition to cutting the repo rate, the RBI has also adjusted other key rates:

Standing Deposit Facility (SDF) Rate: Set at 5.75%
Marginal Standing Facility (MSF) Rate & Bank Rate: Increased to 6.25%

Economic Outlook & Inflation Forecast

Governor Sanjay Malhotra also revised the GDP growth forecast for the current fiscal year from 6.7% to 6.5%. This revision takes into account global challenges, particularly the trade tariffs imposed by former U.S. President Donald Trump.

On the inflation front, the RBI has also adjusted its forecast, lowering the expected retail inflation to 4% from the previous 4.2%. This comes on the back of favourable agricultural prospects, including healthy reservoir levels and strong crop production.

How Does the Repo Rate Cut Impact Home Loan Borrowers?

For home loan borrowers, the repo rate cut brings some good news. Borrowers with floating-rate home loans can expect a reduction in their EMIs (Equated Monthly Instalments) as lenders begin passing on the benefits of the rate cut.

Currently, the lowest home loan rates in the market range between 8.10% and 8.35%. These rates are typically reserved for prime borrowers—those with a credit score above 750 or those looking to refinance. With the repo rate cut, there’s a chance that home loan rates could dip below 8%, making it an ideal time to explore refinancing options or lock in a new home loan at a favourable rate.

However, while the RBI has acted, the real impact on borrowers depends on how quickly and effectively commercial banks pass on these benefits.

What Does an ‘Accommodative’ Stance Mean?

Alongside the 25 bps cut in the repo rate, the RBI also made an important shift in its tone—moving from a ‘neutral’ to an ‘accommodative’ policy stance. But what does that actually mean?

In simple terms, the central bank is signalling that it is ready to cut rates further if the situation demands it, especially to boost domestic demand, investments and credit growth—even if inflation hovers near the upper end of its target range. That’s quite a shift from the cautious, hawkish tone we saw through most of 2023 and early 2024.

But it’s not all smooth sailing. The RBI now faces a tricky balancing act—supporting growth without turning a blind eye to risks like rupee volatility or inflation pressures from global trade disruptions. With tariff tensions between the US and China heating up again, the threat of a broader trade war is real. And while India’s external position remains stable, a global downturn could impact our exports, services and remittances.

So, What Should Investors Make of All This?

The RBI has made its intent clear: it’s leaning towards growth support, even as it keeps an eye on the storm clouds gathering abroad.

For investors, here’s what this means:

Corporate earnings will take centre stage in the coming weeks. Q4 results will shape market sentiment, so keep an eye on performance updates and management commentaries.
Volatility may rise—but that doesn’t mean it’s time to panic. In fact, it’s a good time to reassess and churn your portfolio.
Consider Systematic Investment Plans (SIPs) or Systematic Transfer Plans (STPs) to navigate the ups and downs without trying to time the market.
Explore diversified investment baskets like Liquide Wealth Baskets to spread your risk smartly.

The road ahead might be unpredictable, but sticking to your financial plan will help you stay on course. Be patient and don’t lose sight of your long-term goals.

We’ll be keeping a close watch on market trends and key developments. If you haven’t already, subscribe to our blog for timely updates, expert insights, and actionable ideas to help you stay ahead.