In our fast-paced lives, all of us are linked to EMIs in some way—whether it’s the dream of a home, a child’s education, or the desire for a better car. In such a scenario, if a piece of news from the Reserve Bank of India (RBI) can alleviate our financial worries, it truly brings peace to the hearts.
With this feeling of relief, the RBI has taken a major decision in the final month of the year—a 25 basis point cut in the Repo Rate. This rate now stands at 5.25%, and it is expected that banks will soon pass on this benefit to consumers.
RBI Repo Rate Cut: What is the New Update?
The RBI’s Monetary Policy Committee (MPC) took this decision unanimously after a three-day meeting. The committee faced two major economic realities:
- Inflation is continuously declining.
- The rupee has weakened under pressure, slipping past the 90-rupee-per-dollar level.
Ultimately, the RBI decided that falling inflation presented the right time to offer relief to the public.
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Easing Inflation, Yet Global Challenges Persist
The RBI has reduced its projection for CPI or retail inflation to 2%, which is significantly lower than the previous estimate. The inflation is low and that means that interest rates can be reduced to boost the economy.
However, on the opposite side, global trade tensions, the US’s 50% tariff on Indian goods, and a decline in exports continue to affect India’s economy.
2025 Wrap: Strong Glimmer of Growth Amidst Challenges
RBI Governor Sanjay Malhotra clearly says that, despite challenges, India set an example of growth and stability in 2025. India has shown a balance of strong growth and controlled inflation throughout the year. Based on this confidence, the RBI has also increased its GDP forecast. The previous estimate was 6.8% but the renewed estimate is 7.3%.
This change indicates that India’s economic momentum could improve further in the second half of the year.
Impact on Exports – US Tariffs Create Difficulties
Significant pressure has been observed on India’s exports.
- Exports to the US fell by 8.5% in October.
- Total exports also dropped by 11.8% to $34.38 billion.
To support domestic demand, the government cut the GST in September, leading to a strong collection of ₹1.95 lakh crore in October. This softened slightly to ₹1.7 lakh crore in November.
Changes to Monetary Policy: SDF and MSF Also Adjusted
In addition to the repo rate, the RBI has also adjusted other key rates, SDF (Standing Deposit Facility) at 5% and MSF (Marginal Standing Facility) at 5.5%.
Moreover, a decision has been taken to purchase government bonds worth ₹1 lakh crore to maintain liquidity in the financial system. This will ensure that banks have more money available for lending.
What Does This Decision Mean for the Common Person?
The effect of the repo rate cut will first be felt by those who have EMIs for home loans, car loans, or personal loans. Even though banks did not fully pass on the benefits of previous cuts, there is an expectation that there will definitely be some relief in EMIs this time.
Cheaper loans always promote household spending, investment, and economic activity—and this is what will give momentum to India’s growth journey in the new year.
Disclaimer:
This article is prepared based on available information, official statements, and reliable reports. The analysis provided here aims to offer readers a clear and simple understanding of economic events. Always consult your financial advisor before making any financial decisions.
Dr. Bidyut Barun Sarmah, with 22+ years of experience in print, electronic, and digital media, holds an MA and PhD in Mass Communication and Journalism. He has worked with AIR, Doordarshan, and the Publication Division under the Ministry of Information and Broadcasting. A published author and researcher, Dr. Sarmah writes extensively in both Assamese and English. He was also awarded a prestigious fellowship by the Ministry of Culture, Government of India, for his study on journalistic literature—an achievement that highlights his depth of scholarship and contribution to media studies. At Nest of News, he leads the editorial team and contributes across diverse topics.