RBI Repo Rate Cut Expected on 7 February 2025: Good News for Home Loan Borrowers

Feb 5, 2025

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India's Reserve Bank of India (RBI) is set to announce key monetary policy decisions on February 7, 2025. Experts expect a 25 basis points repo rate cut, bringing relief to home loan borrowers.

RBI Repo Rate Cut Expected on 7 February 2025: Good News for Home Loan Borrowers

After the much-anticipated announcement of the Union Budget, which brought significant relief to taxpayers, there's more good news on the horizon. This time, it's coming from the Reserve Bank of India (RBI). As the RBI’s Monetary Policy Committee (MPC) begins its crucial meeting today, February 5, all eyes are now on the expected outcome of the meeting, which will culminate on February 7, 2025.

The key expectation for millions of homebuyers and borrowers in India is a potential reduction in the repo rate, which could directly lead to a cut in Home Loan EMIs. For many, the day they have been eagerly awaiting could finally arrive this week.

What’s Happening at the RBI MPC Meeting?

The RBI MPC's monetary review meeting, scheduled from February 5 to 7, 2025, holds immense importance, especially after Finance Minister Nirmala Sitharaman's tax relief announcements in the recent Union Budget. It is expected that the RBI may follow suit by cutting interest rates, specifically the repo rate, to boost economic growth and ease inflationary pressures. The RBI’s decision will play a significant role in shaping India’s monetary policy for the coming months.

The country’s ongoing economic struggles, such as the depreciation of the rupee and concerns regarding imported inflation, are crucial factors that the RBI must address. Economic analysts believe that the RBI will act cautiously but decisively to prevent any further economic slowdowns and alleviate some of these challenges.

Why Are People Expecting an Interest Rate Cut?

After a year of economic uncertainty and inflationary pressures, RBI's current review meeting is expected to give some relief to borrowers. India’s economy has shown resilience compared to other global economies, and although global inflation has picked up, experts suggest India remains less affected.

In light of this, RBI may take a step toward easing borrowing costs to stimulate demand and consumption, especially after the government's decision to increase tax exemptions in the recent budget. The move could provide further momentum to India's recovery post-pandemic, as lower borrowing rates would encourage more spending, particularly in the housing and automobile sectors.

Experts Weigh In

Shantanu Sengupta, an economist at Goldman Sachs, highlighted that the uncertainty in the current global scenario—marked by tariff changes and shifting global economic structures—has led to a slight uptick in inflation. However, he emphasized that India’s economy is expected to weather these global challenges better than many others. With the rupee stabilizing and the recent adjustments in the currency market, Sengupta believes the RBI could look to ease rates by 25 basis points.

The RBI's decision will also come at a critical time when India’s banking system is receiving a boost in liquidity. Recently, the RBI announced measures that are expected to infuse liquidity worth ₹1.5 lakh crore into the banking system by the end of February 2025, an announcement that has garnered positive feedback from market analysts.

What’s Next?

With the ongoing RBI meeting, all eyes are on the February 7 announcement when the final decision on the repo rate will be revealed. A potential rate cut would not only bring relief to borrowers but would also provide a boost to India’s economic recovery.

The Bottom Line

The RBI's decision on February 7 will be a significant moment for India’s economy. If the rate cut happens, it will align with the government's budgetary measures aimed at stimulating consumption and easing financial pressures on the average citizen. As the repo rate reduction looks increasingly likely, this is a development that homebuyers, borrowers, and the general public are keenly watching.

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