RBI MPC Rate Cut: Cheaper Auto Loans?

The Reserve Bank of India ( RBI ) has announced a 25 basis points cut in the repo rate, bringing it down to 6%. This move is being perceived as a positive step towards improving consumer sentiment and boosting demand, especially in sectors like automobiles.

Reacting to the decision, Shailesh Chandra, President of the Society of Indian Automobile Manufacturers (SIAM) and Managing Director at Tata Passenger Vehicles and Tata Passenger Electric Mobility, said the rate cut would help the auto industry by making vehicle financing more affordable.

"A reduction in rates at this time will support the auto sector by improving accessibility through lower financing costs. It’s likely to build positive market sentiment," Chandra noted.

The rate cut comes shortly after the Union Budget , which included income tax reliefs that aim to increase disposable income for consumers. Together, these measures are expected to lift consumer confidence and encourage spending on big-ticket items like cars and two-wheelers, as per industry observers.

Industry experts believe the move could be especially helpful for price-sensitive segments such as entry-level cars as well as two-wheelers, where high prices and expensive loans have dampened demand in recent months.

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

C.S. Vigneshwar, President of the Federation of Automobile Dealers Associations (FADA), welcomed the RBI’s decision, describing it as a “positive” and “timely policy move” that strikes a balance between spurring growth and keeping inflation in check. He noted that lower interest rates would ease the cost of borrowing, especially for consumers eyeing two-wheelers and entry-level cars—segments that have faced sluggish demand due to rising prices.

“When paired with the Finance Minister’s recent tax relief, which exempts income up to Rs 12.75 lakh, the rate cut could meaningfully boost disposable income and help revive slow-moving segments of the market,” Vigneshwar added.

Vinnie Mehta, Director General of the Automotive Component Manufacturers Association (ACMA), also viewed the rate cut as a step in the right direction, especially when seen alongside the Budget’s pro-growth agenda.

“This move will increase liquidity, bring down borrowing costs, and strengthen the manufacturing ecosystem,” he said. “It opens up better access to finance for companies investing in R&D, local production, and green technologies. It will also help Tier 2 and Tier 3 suppliers secure working capital, which is crucial for keeping the entire auto supply chain running smoothly.”
With credit becoming more affordable and consumer sentiment on the rise, the automotive sector is optimistic that this shift in monetary policy will spark a broader recovery—one that supports carmakers, parts suppliers, and dealerships alike.