<p>New Delhi: Equated Monthly Installments (EMIs) on home, auto and other loans are likely to decline as the Reserve Bank of India (RBI) is expected to cut policy interest rates this week.</p>.<p>A majority of analysts expect 25 basis points (bps) cut in key policy rates, while some eye a deeper 50 bps reduction (100 basis points is 1%).</p>.<p>“Falling inflation will give the RBI the flexibility to prioritise growth amidst external headwinds,” CareEdge Ratings said in a note.</p>.RBI’s tightrope walk amid policy shifts.<p>The central bank’s rate setting panel Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, will begin its deliberation on the economic situation on Wednesday. The decision on interest rates is scheduled to be announced on June 6.</p>.<p>The RBI has cut policy rates twice this year. It lowered the policy repo rate by 25 bps in February and by the same magnitude in April.</p>.<p>According to SBI Research, the RBI may go for a deeper 50 basis points reduction in the repo rate this week.</p>.<p>“We expect a 50-basis point rate cut in June 2025 policy as a large rate cut could reinvigorate a credit cycle. Cumulative rate cut over the cycle could be 100 basis points,” SBI Group Chief Economic Advisor Soumya Kanti Ghosh noted in the report.</p>.<p>At present, the repo rate, or the interest at which the RBI lends money to commercial banks for short-term needs, stands at 6%. When the repo rate is lowered, borrowings become cheaper for banks. This leads to lower EMIs on housing, auto and other loans.</p>.<p>Following the 50-bps repo rate cut by RBI in February and April 2025 (combined), a majority of the banks reduced their repo-linked external benchmark-based lending rates (EBLRs) by a similar magnitude, as per the SBI Research report.</p>.<p>Around 60.2% of the loans in India are linked to EBLR, while 35.9% are linked to the marginal cost of funds-based lending rate (MCLR), which is referenced to the cost of funds, thus having a longer reset period. </p>.<p>Interest paid by banks on fixed and other deposits also get impacted due to the RBI’s policy rate action. </p>.<p>“We believe for the first time liabilities are getting repriced faster in a rate easing cycle. Banks have already reduced interest rates on savings accounts to floor rate of 2.70%. Also, fixed deposits (FDs) rates have been reduced in the range of 30-70 bps since February 2025. Transmission to deposits rates is expected to be strong in the coming quarters,” SBI Research said.</p>
<p>New Delhi: Equated Monthly Installments (EMIs) on home, auto and other loans are likely to decline as the Reserve Bank of India (RBI) is expected to cut policy interest rates this week.</p>.<p>A majority of analysts expect 25 basis points (bps) cut in key policy rates, while some eye a deeper 50 bps reduction (100 basis points is 1%).</p>.<p>“Falling inflation will give the RBI the flexibility to prioritise growth amidst external headwinds,” CareEdge Ratings said in a note.</p>.RBI’s tightrope walk amid policy shifts.<p>The central bank’s rate setting panel Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra, will begin its deliberation on the economic situation on Wednesday. The decision on interest rates is scheduled to be announced on June 6.</p>.<p>The RBI has cut policy rates twice this year. It lowered the policy repo rate by 25 bps in February and by the same magnitude in April.</p>.<p>According to SBI Research, the RBI may go for a deeper 50 basis points reduction in the repo rate this week.</p>.<p>“We expect a 50-basis point rate cut in June 2025 policy as a large rate cut could reinvigorate a credit cycle. Cumulative rate cut over the cycle could be 100 basis points,” SBI Group Chief Economic Advisor Soumya Kanti Ghosh noted in the report.</p>.<p>At present, the repo rate, or the interest at which the RBI lends money to commercial banks for short-term needs, stands at 6%. When the repo rate is lowered, borrowings become cheaper for banks. This leads to lower EMIs on housing, auto and other loans.</p>.<p>Following the 50-bps repo rate cut by RBI in February and April 2025 (combined), a majority of the banks reduced their repo-linked external benchmark-based lending rates (EBLRs) by a similar magnitude, as per the SBI Research report.</p>.<p>Around 60.2% of the loans in India are linked to EBLR, while 35.9% are linked to the marginal cost of funds-based lending rate (MCLR), which is referenced to the cost of funds, thus having a longer reset period. </p>.<p>Interest paid by banks on fixed and other deposits also get impacted due to the RBI’s policy rate action. </p>.<p>“We believe for the first time liabilities are getting repriced faster in a rate easing cycle. Banks have already reduced interest rates on savings accounts to floor rate of 2.70%. Also, fixed deposits (FDs) rates have been reduced in the range of 30-70 bps since February 2025. Transmission to deposits rates is expected to be strong in the coming quarters,” SBI Research said.</p>