RBI’s Shock 50 bps Repo Cut Sends Ripples Through India’s Economy

In an unexpected move, the central bank slashed rates amid slowing growth—even as inflation stays tame. Here’s what this means for your EMIs, the rupee, and your wallet.

On June 6, 2025, the Reserve Bank of India cut the repo rate by 50 basis points, taking it to 5.5%—a sharp move that took markets by surprise. The central bank also reduced the cash reserve ratio by 100 basis points, signaling a clear shift in its policy stance toward growth stimulation.

Governor Sanjay Malhotra said the decision was based on softening inflation and a slowdown in GDP, which is expected to hover around 6.5% this fiscal—its lowest in four years. "While inflation remains under control, growth indicators call for timely action," Malhotra stated at the post-policy press briefing, as reported in The Economic Times.

The move spells good news for borrowers. Home loan EMIs are expected to drop by ₹600 to ₹1,200 per month, depending on tenure. Auto and personal loans will likely follow suit. According to a report in LiveMint, banks including HDFC and SBI are expected to revise their lending rates within the next two weeks.

However, the rupee is already feeling the heat. Reuters reported that the USD/INR one-month forward premium dropped to its lowest in over a year, indicating a weakening carry trade advantage. Equities, meanwhile, cheered the announcement—the Sensex rose 390 points intraday, led by banking and infrastructure stocks.

On social media, the response was mixed. A Reddit thread on r/IndiaFinance joked, “This rate cut is like a long-awaited birthday gift that turned out to be socks—useful, but not exactly thrilling.” Another user noted, “This may ease my EMI pain, but I'm worried about my mutual fund returns now.”

While the RBI has left room open for future rate changes depending on data trends, this bold move clearly marks a break from its traditionally conservative stance.

Have you seen changes in your EMIs, savings rates, or investments since the rate cut? Let us know how this decision is affecting your finances.