RBI New Rule

Will RBI Cut Interest Rates and Reduce Loan EMIs? Know asap 

by

RBI EMI Cut: After the Union Budget 2026 was announced along with the landmark India-US trade deal, everyone’s eyes are now on the three-day meeting of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC). This important meeting, led by Governor Sanjay Malhotra, kicks off today, Wednesday, and the outcomes will be revealed on Friday, February 6th.

Economists think that this time around, the MPC might hit the ‘pause’ button instead of slashing the policy rates (Repo Rate) further. Since February 2025, the RBI has lowered the repo rate by a total of 125 basis points (1.25%), bringing it down to 5.25% as it stands now. Experts suggest that the central bank’s current priority will be on managing liquidity, stabilizing the bond market, and tackling currency risks.

Inflation and Anticipating New Data

One of the key reasons for keeping interest rates steady is the growing threat of inflation. New inflation figures are set to rise in the upcoming base year series, which will be released on February 12th. A report from Yes Bank states, “Right now, the repo rate is at 5.25% and inflation is projected to hover around 4%. In this context, a real rate of 1.25% makes sense.” Analysts believe that the RBI should adopt a neutral position to allow for flexibility in case of an economic downturn in the future.

Radhika Rao, a Senior Economist at DBS Bank, emphasizes the importance of liquidity and the bond market, saying, “The budget for FY2027 has proposed significant borrowings. Hence, the central bank will need to stay proactive in managing borrowing costs.” Recently, the RBI announced plans to inject over Rs 2 lakh crore into the banking system. They will utilize tools like open market bond purchases (OMOs), foreign exchange swaps, and variable rate repos (VRRs) for this purpose.

The market is already quite volatile following the budget and international trade agreements. Therefore, the RBI’s primary objective will be to ensure financial stability. If the repo rate remains unchanged on Friday, it will signal to the market that the central bank wants to take time to assess the impact of the rate cuts made so far.

Related Stories

Latest