RBI May Cut Repo Rate by 0.50% Today; EMI Reductions Expected
RBI Meeting: The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) may announce a repo rate cut today. According to a report by the State Bank of India (SBI), the RBI could reduce the rate by 25 to 50 basis points. If this happens, interest rates on home loans, auto loans, and other loans may decrease, leading to lower EMIs.
RBI's Decision Announcement at 10 AM Today
The outcome of the Reserve Bank of India's Monetary Policy Committee (MPC) meeting will be announced at 10 AM today. RBI Governor Sanjay Malhotra will share the decision regarding the Repo Rate this morning. Considering the country's economic situation, inflation rate, and consumer demand, a repo rate cut is anticipated.
Market experts and reports from public sector banks suggest that this cut could range from 25 basis points (0.25%) to 50 basis points (0.50%). This is expected to lead to a decrease in loan interest rates.
Why is a Repo Rate Cut Necessary?
The State Bank of India's (SBI) research report indicates that the RBI aims to increase credit flow given the current economic uncertainties. Reducing the repo rate could be an effective measure to boost global recession concerns, address sluggish domestic demand, and stimulate investment.
SBI believes that a 50 basis point repo rate cut will make borrowing cheaper, accelerating business activities. This will help boost the economy and maintain financial stability.
Current Repo Rate
Currently, the RBI's repo rate stands at 6%. The repo rate is the rate at which the RBI lends short-term funds to banks. When the repo rate decreases, banks also reduce their loan interest rates, resulting in lower EMIs for consumers.
If the RBI cuts the repo rate by 25 basis points in today's meeting, the rate will become 5.75%. A 50 basis point cut would bring it down to 5.50%.
How Will Interest Rate Reduction Affect EMIs?
Suppose you have taken a home loan from a bank at an annual interest rate of 9%. If the RBI cuts the repo rate by 50 basis points, and your bank implements this in its interest rate, the interest rate will decrease to 8.50%.
This will significantly reduce your loan EMI. Lower EMIs ease the burden of loan repayment and provide financial relief.
EMI Difference on a ₹50 Lakh Loan
If you have taken a ₹50 lakh home loan for 30 years at a 9% interest rate, your current monthly EMI would be approximately ₹40,231.
If the RBI cuts the repo rate by 50 basis points, and the bank offers an 8.5% interest rate, your EMI would decrease to approximately ₹38,446.
This means a monthly saving of approximately ₹1,800 to ₹2,000, resulting in an annual saving of up to ₹24,000.
Relief on a ₹20 Lakh Loan
For a ₹20 lakh loan taken for 20 years at a 9% interest rate, the current EMI is approximately ₹17,995. If the interest rate drops to 8.5%, the EMI will decrease to approximately ₹17,356.
This translates to a monthly EMI reduction of about ₹640 and an annual saving of approximately ₹7,500.
Impact on Auto and Personal Loans
The repo rate cut will not be limited to home loans only. Interest rates on auto loans, personal loans, and education loans may also decrease, making it more affordable to purchase cars, two-wheelers, or other goods.
