Taking an important step today, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) announced that the repo rate will remain at 5.5%. This decision was taken unanimously by all the members of the committee headed by RBI Governor Sanjay Malhotra.
**RBI cuts rates by 125 basis points**
In the last one year (January 2025 to June 2026), the Reserve Bank of India (RBI) has changed the repo rate four times. Meanwhile, the rate was reduced from 6.50% to 5.25%, giving an overall relief of 1.25% (125 basis points). The first cut of 0.25% was made in February 2025, and then again by 0.25% in April. A bigger cut of 0.50% was implemented in June last year, followed by a further cut of 0.25% in December. There was no change in the rates during the meeting held in February this year.
**What is the impact on loan and EMI?**
**Reduction in Loan EMI:** Interest rates today (5.25%) are much lower than the ones at the beginning of last year (6.50%). As a result, EMIs for floating-rate home loan borrowers have reduced significantly compared to last year.
**Reduction in FD interest rates:** Last year, when repo rates were high, banks used to give very good returns on fixed deposits (FD). After continuous rate cuts throughout the year, banks have reduced their FD interest rates.
**Benefits of not changing the repo rate**
The decision to keep the repo rate at 5.25% means that there will be no increase in the loan EMI; There will be no increase in monthly installments of home, car or personal loan.
Taking new loans will also become easier. If you are planning to take a loan for a new home or car, you will be able to get it at the current low rates from banks. This will also bring good earnings from fixed deposits, because the interest rates offered by banks to senior citizens and the general public are not likely to reduce anytime soon, due to which investors will continue to get the benefit of higher returns.
This decision of RBI will also strengthen the economy; With the fear of increasing interest rates gone, demand for houses and new vehicles is expected to increase in the market, which will lead to a boom in the real estate and automobile sectors.
By keeping the rates stable, RBI manages to maintain the economic momentum of the country and also keeps an eye on rising crude oil prices due to the ongoing crisis in West Asia.
