Home, auto loans to get cheaper as RBI delivers surprise 50 bps rate cut

New Delhi: Reserve Bank monetary policy action to cut repo rate by large 50 basis points is among the most growth-oriented and borrower-centric interventions seen in recent years, and will reduce repayment burden on individuals as well as corporate, experts said.

Home, auto and other loans are likely to cost less as the Reserve Bank of India (RBI) cut interest rates by a larger-than-expected 50 basis points on Friday, and unexpectedly reduced the cash reserve ratio for banks to make available more money to lend in a bid to boost the economy.

Bandhan Bank Chief Economist Siddhartha Sanyal said the monetary policy committee (MPC) meeting sprang several major surprises, including 50 bps against expectation of a 25 bps rate cut.

"However, given the change in stance of monetary policy from accommodative to neutral and the RBI's communication of very little space for more support from monetary policy, our expectation of a terminal repo rate of 5.50 per cent in the current cycle remains largely unchanged," Sanyal said.

Bank of Baroda Chief Economist Madan Sabnavis said the RBI has surprised with a 50 bps cut in repo rate and cut in CRR. However, significantly it has been stated that the stance is changed to neutral, which also means that we may not expect rate cuts in the near future.

Shikhar Aggarwal, Chairman of BLS E Services, said the reduction in repo rate will bring relief to borrowers with lower EMIs, marking a cumulative 100 bps reduction since February.

"A highly encouraging development for both existing and prospective homebuyers. This rate cut is poised to create a significant improvement in affordability, especially for first-time purchase. With the MPC shifting to a neutral stance and a phased CRR cut, liquidity and credit growth may see a boost," he said.

Anantharam V Varayur, Co-Founder, Manasum Homes Senior Living, said, "With lower EMIs, families can now consider senior living options that offer a community, medical access, and dignity in aging." Varayur added that it is crucial to note that the benefits of this rate cut will vary across loan types, with borrowers linked to the External Benchmark Lending Rate (EBLR) likely to see the most immediate impact.

Capital Small Finance Bank MD & CEO Sarvjit Singh Samra said the significant 50-bps repo rate cut to 5.50 per cent, coupled with a substantial yet staggered 100-bps CRR reduction, is a well-calibrated decision that will infuse Rs 2.5 lakh crore into the system.

"With a 100-bps repo rate cut in 2025 so far, this marks the sharpest easing cycle since the pandemic, aimed at proactively anchoring growth," Samra said.

Manappuram Finance Managing Director & CEO V P Nandakumar said the RBI's June 2025 monetary policy is among the most growth-oriented and borrower-centric interventions seen in recent years.

The 50 basis points repo rate cut, combined with a 100 bps CRR reduction, signals the central bank's clear intent to stimulate credit flow and catalyse economic activity.

"For NBFCs like ours, this twin move is a timely boost -- it lowers our cost of funds and equips us to pass on the benefit to customers, particularly in the MSME and gold loan segments where affordable credit can drive livelihood and enterprise growth," Nandakumar said.

Sachin Sachdeva, Vice President, Sector Head, Financial Sector Ratings, ICRA, said with 100 bps cut in CRR to be implemented in phases starting September 2025, banks will see a benefit of 3-4 bps on the interest margins for FY26.

"The steep cut of 50 bps in repo rate is expected to sharply impact the net interest margins (NIMs) of the banks and Q2, FY25, is expected to be the weakest. Thereafter, the pressure on NIMs is expected to decline with the benefit starting to flow in from CRR cut and extent of cut taken by banks on their saving rate deposits while the term deposit rates will reprice downward with a lag," Sachdeva said.

Ashok Kapur, Chairman, Krishna Group and Krisumi Corporation, said a reduced repo rate translates to lower borrowing costs, while the CRR cut will enhance liquidity in the banking system.

"Together, these steps will encourage homebuyers to make property investment decisions. Moving forward, this move will have a ripple effect on demand in the coming months across different segments of homes, ultimately contributing to sustained growth and increased confidence in the real estate market," Kapur said.

Commenting on the monetary policy, Head of Fixed Income at Union Asset Management Company Parijat Agrawal said the MPC actions were forward-looking and took the markets by surprise.

"The downward revision of the inflation forecast is expected to provide reassurance. We expect growth to be supported with the ongoing rate transmission. Any additional rate cuts from here on appear unlikely in the near term and would be data dependent," Agrawal said.