New Delhi, June 6, 2025 — In a significant move aimed at revitalizing economic growth, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points—from 6.00% to 5.50%—during the 55th meeting of the Monetary Policy Committee (MPC), chaired by RBI Governor Sanjay Malhotra. The rate cut is expected to make borrowing more affordable, boost credit flow, and support consumption amid signs of easing inflation.
Major Banks Respond with Lending Rate Cuts
Leading banks across the country swiftly reacted to the RBI’s announcement by reducing their lending rates. Bank of Baroda was among the first to implement the cut, followed closely by Union Bank of India, Canara Bank, and Indian Overseas Bank. These public sector banks have lowered their lending rates by 50 basis points.
Union Bank of India confirmed the revision of its External Benchmark Lending Rate (EBLR) and Repo Linked Lending Rate (RLLR), stating that the changes will benefit both new and existing borrowers. The rate adjustment is expected to reduce the burden on consumers availing home, vehicle, personal, and MSME loans.
Fixed Deposit Interest Rates Also Decline
The ripple effect of the repo rate cut has extended to deposit rates as well. Several private sector banks—including HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank—have announced reductions in fixed deposit (FD) rates, ranging between 10 and 35 basis points. Public sector banks such as Canara Bank and Indian Bank have also revised their FD offerings downward.
Monetary Policy Transmission Gains Traction
The prompt alignment of both lending and deposit rates across banks underscores a robust transmission of the RBI’s monetary policy. Lower borrowing costs are anticipated to stimulate consumer spending and revive demand in sectors like housing, automobiles, and small business lending.
Analysts view the coordinated response from the banking sector as a positive signal for India’s economic recovery, emphasizing the importance of timely monetary interventions in sustaining financial momentum and accelerating growth in a post-inflationary environment.
