The Reserve Bank of India’s decision to cut the repo rate by 25 basis points to 5.25 per cent has set the tone for a more accommodative borrowing environment
in 2025. But with the possibility of further cuts and the RBI signalling a “low rate” regime as long as inflation remains benign, borrowers are left wondering: Is now the right time to take a loan, or should they wait for the next move? After the policy announcement, RBI Governor Sanjay Malhotra told media that the central bank expects interest rates to remain low unless inflation rises again. “We expect benign inflation and so if the inflation continues to be the way it is, we expect the policy rates to be low and not high,” Malhotra said. He refused to offer a specific lower limit the repo rate could fall to but noted that RBI inflation projections remain soft. At the same time, he cautioned against reading too much into recent inflation prints, which dropped to unusually low levels. “0.2 per cent is not the right level of inflation. We target 4 per cent,” he stressed. The Governor added that low readings can be volatile due to multiple factors and should not be taken too seriously. Malhotra reiterated that the central bank will remain data-driven, reminding that it is “speculative” to predict future decisions of the Monetary Policy Committee (MPC).
What borrowers have already gained
According to Pankaj Bansal, Chief Business Officer at BankBazaar, borrowers are already benefiting significantly from the rate cuts delivered over the last few policy cycles. About 125 bps of cumulative cuts have already been transmitted.
"For many borrowers, this translates into substantial interest savings," according to Bansal.
Understand with example | Rs 18 lakh saved on a Rs 50 lakh home loan
On a Rs 50 lakh home loan for 20 years, if the borrower keeps the EMI unchanged after the cumulative rate reductions, the total interest outgo may reduce by up to Rs 18 lakh.
This quick benefit is due to the fact that 92 per cent of retail loans are now linked to external benchmarks such as the repo rate, enabling near-instant transmission whenever RBI cuts rates.
What should existing borrowers do now?
The expert has advised that:
Check your loan statement every 2–3 months: Ensure your lender has applied the revised interest rate. Mistakes or delays are not uncommon.
Visit the branch for rate recalibration if needed: If the updated rate hasn’t reflected, borrowers should request recalibration at their home branch.
Keep your EMI unchanged to maximise savings: This shortens the loan tenure and reduces total interest.
New borrowers get the new rate automatically: Fresh loans will directly reflect the reduced interest rates without any action needed.
Should you take a new loan now?
Loan rates are currently in the 7 per cent to 8.4 per cent range, among the lowest in many years, making borrowing attractive for home loans, auto loans, or other credit needs.
Bansal notes that broader macro conditions are also supportive:
- Stable real estate demand
- Strong job market, improving repayment capability
- GST rationalisation, boosting discretionary spending
Should you wait for more cuts?
Here’s the key reading of the Governor’s remarks:
- RBI expects inflation to stay benign, which means rates may remain low.
- But the central bank is not committing to further cuts.
- Recent extremely low inflation prints are not sustainable, and RBI still targets 4 per cent inflation, not ultra-low levels.
- Future rate decisions depend entirely on data.
What this means for borrowers
Lower rates may persist, but there is no guarantee they will fall much further. Most of the major benefit (125 bps transmission) is already reflected in loan rates. Waiting for small incremental cuts may not offer meaningful additional gain.
