RBI cuts interest rate by 25 bps to 6%, home, auto and corporate loans to be cheaper

Mumbai | The RBI on Wednesday slashed key interest rate by 25 basis points, for the second time in a row, to support a shuttering economy hit by reciprocal tariffs imposed by the US.

Following the rate cut, the key policy rate eased to 6 per cent providing relief to home, auto and corporate loan borrowers.

In its last policy in February, RBI had trimmed repo rate by 25 basis points to 6.25 per cent. This rate came after previous rate reduction in May 2020. The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5 per cent.

The Monetary Policy Committee (MPC) unanimously decided to slash the policy rate by 25 basis points to 6.25 per cent, RBI Governor Sanjay Malhotra said.

RBI has lowered the GDP growth forecast to 6.5 per cent from earlier projection of 6.7 per cent due to global uncertainties.

Last week, US President Donald Trump had announced a hefty 26 per cent reciprocal tariffs on Indian imports, effective April 9.

Rate cut, change of monetary stance to 'accommodative' timely move: Experts

New Delhi | The RBI decision to reduce the key interest rate by 25 bps and revise its monetary stance to 'accommodative' is a timely move and will cushion the secondary impact of tariffs on domestic economy, industry players said.

Industry players, including banks, NBFCs, and realtors, also said that the Reserve Bank's latest monetary policy augurs well for the economy amid global trade uncertainties.

SBI Chairman C S Setty said the RBI rate cut coupled with the revision in stance to 'accommodative' was a swift, timely move and a forward guidance to the market to stay supportive against evolving global uncertainties.

"On the regulation side, the market-based securitization framework for stressed assets, review of policy on gold lending and non-fund-based facilities are timely. Widening of the co-lending framework gives wider choices to all parties concerned," Setty said.

The Reserve Bank of India (RBI) cut the repurchase or repo rate by 25 basis points to 6 per cent.

Aditi Nayar, chief economist, ICRA said the 25 bps cut in the repo rate was along expected lines, given the recent evolution of growth inflation dynamics.

"Given the burgeoning global uncertainty, the reduction in the MPC's FY2026 forecasts for both the CPI inflation and GDP growth by 20 bps each and the change in stance to accommodative, amidst the clarity that it signals the future rate and not liquidity trajectory, we now expect an additional 50 bps of rate cuts over the next 3 policy reviews," she said.

RBI changed its policy stance to "accommodative" from "neutral", indicating the possibility of more rate cuts in future, Governor Sanjay Malhotra said while announcing the MPC decisions.

Commenting on the April credit policy, D K Srivastava, chief policy advisor, EY India said the RBI MPC meeting outcome signals its willingness to safeguard India's GDP growth prospects, ensuring that it does not fall below 6.5 per cent in spite of the ongoing global tariff turmoil.

V P Nandakumar, managing director and CEO of Manappuram Finance said "Credit-starved sectors such as MSMEs, housing, and renewable energy are expected to benefit from this monetary easing.

Moreover, an overall improvement in liquidity, business sentiment, credit availability, and economic activity will lift gold loan demand, as it remains a major source of short-term funding for consumption, Nandakumar said.

Expressing his opinion, Mandar Pitale, head treasury, SBM Bank India said an accommodative stance entails easy monetary policy that is geared towards stimulating the economy through softer interest rates.

Pitale expects the regulator to provide sufficient durable liquidity as we move ahead in FY26 for an effective and efficient transmission of the rate cuts to wider sections of the economy.

Shikhar Aggarwal, chairman, BLS E-Services said the reduction in repo rate is anticipated to significantly boost liquidity in the financial system, particularly aiding banks with lower loan-to-deposit ratios.

Raoul Kapoor, co-CEO, Andromeda Sales and Distribution said "lowering the repo rate effectively brings down cost of capital for banks and housing finance companies, translating into cheaper home loans for borrowers. This makes home ownership more affordable, especially for first-time buyers and middle-class households."

Rohit Arora, CEO and co-founder, Biz2Credit and Biz2X said the RBI's latest rate cut, coupled with a shift to an accommodative stance, offers timely tailwinds for credit growth, particularly for India's MSME sector.

Anantharam Varayur, co-founder, Manasum Senior Living said the monetary policy is a positive development for the real estate industry, especially for senior living projects.

Four PSU banks cut lending rate in line with RBI's policy, more to follow suit

New Delhi | Four public sector banks -- Punjab National Bank (PNB), Bank of India, Indian Bank and UCO Bank, have announced up to 35 basis points reduction in lending rate within hours of RBI's decision to slash its policy rate on Wednesday, a move which will help existing and new borrowers.

Other banks are also expected to make similar announcements soon.

These public sector banks, in separate regulatory filings, said the rate revision has been done following the RBI's reduction in the short-term lending rate (repo rate) earlier in the day.

Chennai-based Indian Bank said its Repo-Linked Benchmark Lending Rates (RBLR) will be lowered by 35 basis points to 8.70 per cent effective April 11.

Meanwhile, PNB has revised RBLR from 9.10 per cent, to 8.85 per cent with effect from April 10.

Bank of India's new RBLR stands at 8.85 per cent, compared to 9.10 per cent earlier. The new rate would be effective from Wednesday, Bank of India said in a regulatory filing.

UCO Bank said it has brought down the repo-linked rate to 8.8 per cent, effective Thursday.