More Good News Likely, EMIs To Reduce Further? IDFC 's Gaura Sen Gupta Predicts Further Repo Rate Cuts By RBI

The Chief Economist of IDFC FIRST Bank, Gaura Sen Gupta said that the rate cut cycle is expected to be deeper post the central bank's stance change to accommodative and that there are more rate cuts in the pipeline.  

She said, "we expect the rate cut cycle to be deeper post the stance change to accommodative," adding that the private lender is projecting another "50bps cut in the remainder of 2025 v/s earlier expectation of 25bps."

The economist added that the comfort on inflation with RBI seeing durable alignment of headline inflation with the 4%-target is yet another factor that will influence further rate cuts in the financial year 2025-26 (FY26).

"Despite the downward revision in FY26 GDP estimate to 6.5% from 6.7%, we continue to see downside risk from tariff tensions," she added.

The United States President Donald Trump, while imposing a slew of tariffs on several countries across the world, which has not only caused global markets to act in the most volatile manner but has also impacted domestic markets adversely.

In addition to that, gold prices, which typically rise as markets crash, have also been behaving unusually, as they were also declining.

According to Gaura Sen Gupta, the tariff tensions also have a downside risk to the GDP projection for FY26.

"In our assessment downward impact of growth from tariffs is 0.5%, which hasn’t been baked into the GDP estimate," she added.

She further noted that while the RBI Governor, Sanjay Malhotra, maintained the delinking of the stance from the liquidity conditions, "another INR4tn of durable liquidity infusion in FY26," is expected.

"This is required to ensure that system liquidity is in INR2tn surplus (or 1% of NDTL). The latter is essential for transmission of rate cuts to take place," she added.

How Will This Impact EMIs?

With a reduced repo rate banks may reduce their interest rate on home loans as well as other floating-rate loans which might lead to reduced EMIs.

The MPC has taken an 'accommodative' policy stance, providing room to support growth and easing the inflation-marked trajectory for people taking loans.

For instance, a borrower has borrowed a Rs 50 lakh home loan from a bank at an interest rate of 8.70% over 30 years and the current EMI is Rs 39,157.

Since the interest rate has dropped by 25 bps to 8.20%, the revised EMI will be Rs 38,269, by way of which the borrower can now save Rs 888 every month.

More From The RBI MPC

The Reserve Bank of India (RBI) in its Monetary Policy Meeting (MPC) has reduced the repo rate by 25 basis points (bps) and has reduced its inflation forecast to 4%, the central bank announced on Wednesday.

Additionally, the RBI also lowered the GDP growth forecast to 6.5% for FY26 as global uncertainties are on the rise with respect to the reciprocal tariffs imposed by United States President Donald Trump worldwide.

Also Read: RBI Repo Rate Cut By 25bps: How Will RBI Rate Cut Impact Your EMIs?