Loan relief after 5 years: Interest rates set to drop as RBI plans repo rate cut

After a five-year gap, borrowers of home, personal, and auto loans are finally poised for relief as the Reserve Bank of India (RBI) is expected to cut the repo rate again in its upcoming monetary policy meeting scheduled from April 7 to 9.

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Following a 25 basis point cut in February, the RBI is likely to announce another 25 basis point reduction this month. Experts forecast a total reduction of up to 100 basis points by the end of 2025. If implemented, this will mark the most significant rate cut since the Covid-19 period when banks had lowered lending rates to support the economy.

The repo rate—currently the rate at which the RBI lends to commercial banks against government securities—plays a pivotal role in determining interest rates across the economy. A cut in the repo rate lowers borrowing costs for banks, which can then pass on the benefit to consumers by reducing rates on home, personal, and vehicle loans.

If banks follow suit and slash interest rates by 1 percent, millions of borrowers are expected to feel a substantial financial relief. Monthly EMIs could drop, making loans more affordable and boosting consumer sentiment.

This move could inject fresh momentum into the economy by encouraging spending and investment, reversing the stagnant lending trends seen since the pandemic era.