RBI has cut the repo rate by 50 bps to 5.50% given the continuing downward inflation trend, which is well below the 4% tolerance level. RepoRate is now at its lowest level in nearly 3 years. Furthermore, to support growth and stimulate the credit cycle in a challenging geopolitical and economic environment, the central bank could consider additional rate cuts during the year. With the repo rate reduction, Home Loan borrowers are definitely expected to benefit. We have already seen some return on investment (ROI) benefits from the previous two rate cuts being passed on to borrowers. With a 50 bps rate cut, the home loan EMIs will come down substantially, provided the transmission occurs in real-time and not with a lag. While global economic outlook continues to remain volatile due to trade policy uncertainty, India’s growth projections remain positive, supported by strong domestic fundamentals aided by the government and, to some extent, private capex. The inflation outlook is also positive, supported by low core inflation and the expectation of a good harvest.”
