New Delhi, August 4 – Indian consumers may soon receive some welcome financial relief, especially those planning to buy homes or vehicles. The Reserve Bank of India (RBI) is expected to announce a repo rate cut of 25 basis points in its upcoming Monetary Policy Committee (MPC) meeting scheduled from August 4 to 6, potentially making loans more affordable ahead of the festive season.
According to a recent report by State Bank of India (SBI) Research, the RBI could opt for a rate reduction to boost consumer borrowing and economic activity as the country heads into its high-spending festival months.
Fourth Rate Cut in 2025 on the Cards
This potential cut would mark the fourth repo rate reduction by the RBI this year.
- The central bank slashed rates by 25 basis points in February,
- Followed by another 25 basis point cut in April,
- And a larger 50 basis point cut in June.
These actions have cumulatively brought the repo rate down by 1 percentage point in 2025, signaling the RBI’s focus on stimulating growth amid changing global economic conditions.
Festive Boost to Borrowing Expected
SBI’s research suggests that a rate cut now could provide a timely boost to credit growth as India gears up for its annual festive season, which kicks off in late August and runs through Diwali. The report highlights that historical trends indicate strong loan growth when interest rates are lowered just before major festivals.
For instance, during a similar move in August 2017, when the repo rate was reduced by 25 basis points, the Indian banking system recorded an additional ₹1.96 lakh crore in credit growth by the end of Diwali, with personal loans accounting for nearly 30% of that surge.
Cheaper Loans, But Lower Returns on Deposits
If the RBI follows through with another rate cut, consumers may benefit from cheaper EMIs on home, auto, and personal loans. However, the move is likely to come at a cost to fixed deposit (FD) investors, who could see lower returns on their savings due to the reduced interest rate environment.
What’s Next?
The final decision will be announced by the RBI on August 6, following the conclusion of the MPC meeting. All eyes are on Governor Shaktikanta Das and his policy team, as households and businesses alike await confirmation of what could be a key move to stimulate spending and economic momentum.
With India’s biggest festivals around the corner, including Ganesh Chaturthi and Diwali, a rate cut could provide just the push needed to turn festive sentiment into economic activity.