RBI Cuts Repo Rate To 5.25 Percent. Will EMIs Fall Soon?

The Ministry of Commerce and Industry’s Office of the Economic Adviser recorded a WPI Food Index at minus 5.04 percent for 2025 in its wholesale price report. These numbers changed the base of the lending story.

How far can cheaper credit go when the cost of money moves down at the peak of the year. The answer opened on 5 December 2025 in New Delhi, when the RBI cut the repo rate by 25 basis points to 5.25 percent in the Monetary Policy Committee report.

The lead fact is clear. The rate cut follows two official readings that shaped economic discussions. The Ministry of Statistics and Programme Implementation reported 0.25 percent CPI inflation for 2025 through its monthly press note. 

What This New Rate Move Means For Borrowers In India?

The December policy shifts bank borrowing costs. It changes the way home loans, auto loans and MSME loans may reset in the next two months. The RBI’s December 2025 Monetary Policy Committee (MPC) Statement notes that the repo rate now stands at 5.25 percent. This lower rate gives banks a fresh base to revise their lending benchmarks.

Read More - Is RBI Signalling a Rate Hike Soon? Here’s Why Bond Yields Are Reacting

Before examining the next steps for borrowers, the main indicators that shaped this cut are placed in a clear snapshot. Each number comes from an official government report published in October 2025 or recorded by the RBI in December 2025.
 

These values explain why the central bank found space for policy easing in the last quarter of year 2025.

Why The Repo Rate is Essential And How It Works?

The repo rate is the rate at which banks borrow short term funds from the RBI. It sets the benchmark for lending products across the banking system. Lower rates usually push banks to reduce interest on floating loans. Fixed loans change only if contracts allow revisions. The December 2025 policy report notes that banks face different reset cycles based on their benchmark structure.

The table that follows helps readers understand the official path of policy cuts recorded in RBI documents across three major policy dates.

This movement shows a steady easing path supported by falling inflation. 
 

These changes show that the RBI has been steadily reducing the repo rate as inflation comes down. The move from 6.50 percent to 5.25 percent over the year indicates a gradual easing path, giving banks more room to adjust their lending rates and supporting overall economic activity.

Loan platforms and financial columns tracked the fall in inflation since mid 2025. An article by Loansjagat published in November 2025 stated that falling CPI numbers could push the Monetary Policy Committee toward a fresh cut. 

Also Read - India’s Inflation Falls Below RBI Target Again, Fueling Hopes of an Interest Rate Cut

It also noted that repo-linked home loans may adjust faster than MCLR-linked loans. That outlook now lines up with the December decision. The present cut confirms the trend anticipated in that review: inflation softness leads to policy easing.

Conclusion

The December 2025 decision to cut the repo rate to 5.25 percent rests on firm official numbers. CPI at 0.25 percent and a wholesale food index at minus 5.04 percent built the case for action. The coming weeks will show how fast lenders adjust their rates and how credit demand shapes up in early 2026.
 

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‘Simplify Finance for Everyone.’ This is the common goal of our team, as we try to explain any topic with relatable examples. From personal to business finance, managing EMIs to becoming debt-free, we do extensive research on each and every parameter, so you don’t have to. Scroll up and have a look at what 15+ years of experience in the BFSI sector looks like.