RBI Cuts Repo Rate to 6%; EMIs to Become Cheaper, UPI Transaction Limit Increased, KYC Process Simplified, and Gold Loan Rules to be Reviewed.
RBI Update: The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) on Wednesday reduced the Repo Rate by 25 basis points, bringing it down to 6%. This is the second reduction in 2025, directly impacting the common man's finances. This decision is expected to lead to a decrease in EMIs for Home Loans, Auto Loans, and Personal Loans. Additionally, the UPI Transaction Limit has been increased, potentially accelerating digital payments.
Relief in EMIs, Cheaper Loans
Following the RBI's decision, banks can now reduce their Home and Auto Loans based on the Repo Linked Lending Rate (RLLR). If banks pass on the full benefit of the interest rate reduction to customers, EMIs could decrease. For example, on a ₹50 lakh home loan with a 20-year tenure and a new interest rate of 8.0%, the EMI would be ₹41,822. The total interest on a ₹50 lakh loan could be up to ₹50.37 lakh.
More Affordable Auto Loans
Customers taking out Car and Two-wheeler Loans can now expect loans at lower interest rates. The RBI's reduction will lower the cost of loans in the banking sector, providing direct relief in monthly EMIs.
Increased UPI Transaction Limit
The RBI has approved an increase in the UPI limit for P2M (Person to Merchant) Transactions. This will allow users to easily make larger payments. Currently, the P2P limit is ₹1 lakh and the P2M limit is ₹2 lakh; these limits can now be increased according to varying needs.
Relief from Frequent KYC
The RBI has announced the simplification and ease of the C-KYC process. This will eliminate the need for customers to repeatedly visit banks and submit different documents, saving both time and resources.
Review of Gold Loan Regulations
RBI Governor Sanjeev Malhotra announced a review of the regulations related to Gold Loans. New guidelines for those taking loans by pledging gold may be implemented soon. This could make the loan structure and borrowing rules more transparent and uniform.
