RBI May Cut Repo Rate by 0.25–0.50% in December Amid Falling Inflation: Kotak Securities

The report highlights that while global trade and tariff challenges remain, easing inflation has created space for monetary policy support to spur economic growth. The Consumer Price Index (CPI)-based retail inflation in September fell to 1.54%, primarily due to softening food prices.

A repo rate cut would allow commercial banks to borrow funds at lower costs, translating into cheaper loans for consumers. For instance, monthly EMIs on a ₹20 lakh home loan over 20 years could fall by roughly ₹617, while a ₹30 lakh loan could see a reduction of about ₹925 per month. Over the loan tenure, borrowers could potentially save around ₹1.48 lakh. Both new and existing loan holders are expected to benefit if the cut is implemented.

The RBI has already reduced the repo rate three times in 2025, totaling a 1% cut. In February, the rate was lowered from 6.5% to 6.25%, followed by a 0.25% cut in April, and a 0.5% reduction in June, bringing the rate down to 5.5%. The central bank aims to stimulate borrowing, increase money circulation, and revive economic activity through these measures.

The repo rate, a key monetary policy tool, helps the RBI manage inflation and maintain financial stability. Raising the rate curbs inflation by making loans costlier, while lowering it stimulates growth by reducing borrowing costs. Analysts say that with inflation now moderating, a December rate cut could further boost consumption, investment, and overall economic momentum in India.