As the Reserve Bank of India (RBI) concludes its first Monetary Policy Committee (MPC) meeting for the financial year 2025–26, the outcomes of this high-stakes gathering carry direct implications for your wallet. From interest rates on home, car, or personal loans to petrol prices and inflation expectations, the decisions taken here ripple across the Indian economy’s length and breadth.
Let’s explore what the MPC decided, why it matters, and how it’s going to affect you.
What Is the MPC and Why Should You Care?
The Monetary Policy Committee (MPC) is a six-member panel responsible for setting the policy interest rate, specifically, the repo rate, which is the rate at which the RBI lends to commercial banks. This rate influences everything from your loan EMIs to fixed deposit returns. The committee meets six times in a financial year, with the current meeting held between April 8–10, 2025, only the second MPC chaired by Governor Sanjay Malhotra.
The remaining meetings for FY 2025–26 are scheduled for:
June 4–6, 2025
August 5–7, 2025
September 29 – October 1, 2025
December 3–5, 2025
February 4–6, 2026
Repo Rate Cut: What Was Decided and Why?
The big headline from the April 9 MPC meeting:
A 25 basis point (bps) repo rate cut, bringing it down from 6.25% to 6.00%.
This move marks the second consecutive cut in 2025, signaling a clear shift in the RBI’s approach toward an accommodative policy stance, meaning it is leaning towards further easing if needed. The decision was unanimous among committee members.
What Is a Basis Point?
1 basis point = 0.01%
So, 25 bps = 0.25% — a seemingly small change with big consequences for borrowers.
Why the RBI Cut Rates?
1. Slowing Economic Growth
India’s GDP growth is losing steam. In Q2 FY25, growth was just 5.6%, and although it improved to 6.2% in Q3, it still missed the RBI’s 6.7% projection. Slower economic momentum has increased pressure on the central bank to support demand by making loans cheaper.
2. Easing Inflation
Retail inflation, measured by the Consumer Price Index (CPI), is expected to average 4.8% in Q1 of FY26, and drop further to 4.4% in Q4. The RBI also cut its inflation forecast for FY26 to 4%, down from the previous estimate of 4.2%. With price pressures easing, the RBI has room to focus on growth.
3. Liquidity Crunch in the Banking System
A significant liquidity crunch has gripped the banking sector, with a cash shortage nearing ₹100 crore as of March 2025. In response, the RBI has already announced an Open Market Operation (OMO) worth ₹20,000 crore and could roll out Dollar-Rupee swaps and relaxed lending norms in the coming months.
How Does This Affect You Directly?
1. Cheaper Loans
If you have a home loan, car loan, education loan, or plan to take one, this repo rate cut means your interest rate could drop slightly, depending on how quickly your bank passes on the benefit. This could mean lower EMIs and better borrowing terms.
2. Easier Credit Access
With improved liquidity and lower borrowing costs, banks will likely expand their lending, making it easier for consumers and small businesses to get loans.
3. Fuel Prices and Inflation
Cheaper crude oil prices (now around $60–$65 per barrel) are easing pressure on petrol and diesel prices. This indirectly contributes to lowering inflation, providing more leeway for the RBI to continue rate cuts.
Global Factors at Play- The Trump Tariff Tangle
India is not operating in a vacuum. Global tensions, particularly around potential US tariff escalations under President Donald Trump, are weighing heavily on future policy decisions. The RBI has already cited geopolitical risks and trade disruptions as key reasons for trimming its GDP growth forecast for FY26 to 6.5%, down from earlier estimates.
What Should You Do Now?
With the RBI shifting gears towards an accommodative stance, it’s a good time to:
Review your loan EMIs – your existing bank might lower rates soon.
Consider refinancing if your lender is slow to pass on the benefits.
Hold off on locking long-term deposits, as interest rates might continue to fall.
Monitor global developments, especially around trade and oil prices, as these will shape the next MPC moves.
The RBI’s actions signal relief for borrowers, support for businesses, and a proactive stance to safeguard India’s growth story amid global uncertainty. The coming months could bring further cuts and more breathing room for your finances.
