Decoding RBI's Repo Rate Cut: Its Impact on you
On April 9, 2025, the Reserve Bank of India (RBI) cut the repo rate by 25 basis points (that’s 0.25%), bringing it down to 6%.
This is actually the second time this year they’ve done it—the first-rate cut was back in February.
But here’s the interesting part—RBI didn’t just cut the rate. It also changed its mood, or what experts call the “monetary policy stance,” from ‘neutral’ to ‘accommodative’.
What does that mean in simple words?
It’s like RBI saying, “We’re ready to help the economy grow, and if needed, we won’t hesitate to cut rates again.” This is an speculation comment.
In short:
- Repo rate is reduced (cheaper for banks to borrow money from RBI)
- Your loans may get cheaper
- RBI is open to giving the economy more support if things slow down
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What is Repo Rate?
But yes, here is the confusion come what exactly is this repo rate.
Okay, imagine the situation:
Banks like SBI, HDFC, or Axis sometimes run short of cash—maybe they’ve given out too many loans, or there’s a sudden demand of money in the market.
So, they approached to their big boss—the Reserve Bank of India (RBI)—and ask for some money.
Now, RBI says, “Sure, I’ll give you the money, but you’ll have to pay me some interest.”
And we called that interest the repo rate.
So in short:
Repo rate is the interest rate at which RBI lends money to banks for the short term.
How This Impacts You (Yes, You!)
If You Have Loans
Lower repo rate = Banks might cut loan interest = Lower EMIs.
If you have a home loan, car loan, or personal loan, there’s good news—your monthly EMI could go down. Especially if your loan is linked to the repo rate.
More savings every month!
Analogy:
It’s like your gym saying, “Our equipment costs less now, so we’re reducing your membership fee.”
If You’re Saving in FDs
Uh-oh! FD rates might go down too.
Since banks are getting money cheaper from RBI, they might give you lower interest on Fixed Deposits.
So if you’re depending on FDs for returns, it may be time to look around.
What can you do?
Maybe check out debt mutual funds, or use a laddering strategy (putting money in FDs of different tenures so all don’t mature at the same time).
For Business Owners & Entrepreneurs
Lower repo rate means cheaper business loans.
If you run a business and want to expand—get new equipment, hire more staff, open a new store—it’s easier (and cheaper) to borrow now.
This gives a boost to small businesses and startups, and improves market confidence.
Stock Market Reaction
The stock market usually loves repo rate cuts—but it’s not that simple.
- Positive: Lower rates can mean more spending and investment, means more cash flow in the market, which is good for business.
- Caution: Global unstability (like US market trends or oil prices) still play a big role.
Sectors to watch:
Banks, Real Estate, Auto – these often respond well to repo rate cuts.
Repo rate table
Effective Date | Repo Rates |
9th April 2025 | 6.00% |
7th February 2025 | 6.25% |
6th December 2024 | 6.50% |
9th October 2024 | 6.50% |
8th August 2024 | 6.50% |
7th June 2024 | 6.50% |
5th April 2024 | 6.50% |
8th February 2024 | 6.50% |
8th December 2023 | 6.50% |
10th August 2023 | 6.50% |
8th June 2023 | 6.50% |
6th April 2023 | 6.50% |
8th February 2023 | 6.50% |
7th December 2022 | 6.25% |
30 September 2022 | 5.90% |
8 June 2022 | 4.90% |
4 May 2022 | 4.40% |
22 May 2020 | 4.00% |
27 March 2020 | 4.40% |
04 October 2019 | 5.15% |
07 August 2019 | 5.40% |
06 June 2019 | 5.75% |
01 August 2018 | 6.50% |
06 June 2018 | 6.25% |
02 August 2017 | 6.00% |
Wait, What’s Reverse Repo Rate?
So now we know Repo rate is the rate at which RBI gives money to banks,
then reverse repo rate is exactly the opposite rate at which banks give their extra money to RBI—and RBI pays them interest for it.
It’s the interest RBI pays to banks when banks park their extra money with RBI for safety.
Simple definition of Repo Rate vs Reverse Repo Rate
|
Term |
Meaning |
|
Repo Rate |
RBI lends money to banks → banks pay interest to RBI |
|
Reverse Repo Rate |
Banks lend money to RBI → RBI pays interest to banks |
In simpler terms:
Think of RBI like a teashop.
- If the shop lends you a flask (money), they charge you rent (that’s the repo rate).
- But if you lend your flask (extra money) to the shop for safekeeping, they pay you a small rent (that’s the reverse repo rate).
Usually, the reverse repo rate is lower than the repo rate—because RBI wants banks to give more loans to people like us, instead of just parking money with RBI and chilling.
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