The Reserve Bank of India (RBI) reduced its key repo rate on Friday for the first time since May 2020, aiming to provide stimulus to the sluggish economy, which is projected to grow at its slowest pace in four years during the current fiscal year.

In addition to the repo rate cut, the Standing Deposit Facility (SDF) and Marginal Standing Facility (MSF) rates have also been reduced by 25 bps to 6% and 6.5%, respectively. The bank rate has also been adjusted to 6.5%.

After cutting the cash reserve ratio (CRR) by 50 bps from 4.5% of NDTL, to 4.0% of NDTL in the December 2024 policy, the RBI maintained status quo on CRR in the February 2025 policy. With the system liquidity deficit still at ₹1.96 Trillion, another CRR cut was expected to bridge the current liquidity gap, but that was not to be.

The repo rate cut, combined with the benefits from the revised tax slabs announced in the Union Budget 2025 for the new tax regime, is likely to boost loan eligibility and repayment capacity in the up

After nearly five years, the RBI has cut the repo rate, bringing relief to home loan borrowers and expected to ease borrowing costs.

The RBI’s decision to cut the repo rate by 25 basis points—from 6.50% to 6.25%—in February 2025 is expected to provide a significant boost to homebuyers.

The repo rate cut is expected to lower interest rates on loans, particularly benefiting homebuyers and other borrowers.

Real estate experts feel this rate cut will have a positive impact on the overall sector, making home loans more affordable and increasing demand for housing.

The repo rate influences interest rates on loans, including home loans. When the RBI lowers the repo rate, banks typically reduce their lending rates, making home loans cheaper.

The Reserve Bank of India (RBI) reduced its key repo rate on Friday for the first time since May 2020, aiming to provide stimulus to the sluggish economy, which is projected to grow at its slowest pace in four years during the current fiscal year.