North India Statesman
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News India Live, Digital Desk: Home Loan Interest Rate: According to the latest report of the State Bank of India (SBI), the Reserve Bank of India (RBI) can make a major cut in interest rates in the financial year 2025-26 (FY26). The main reason for this is a sharp decline in inflation. According to the report, in March 2025, the Consumer Price Index (CPI) -based inflation has come down to 3.34%, the lowest in the last 67 months.
Inflation will decrease further next year
SBI Research estimates that the average inflation rate in FY26 will be below 4%. Even in the first quarter it can be less than 3%. This situation has arisen due to the steady fall in the prices of food and drink.
How much can be cut in interest rates?
According to the SBI report, RBI may cut interest rates in June and August 2025 in total 0.75% (75 basis points). After this, it is possible to deduct 0.50% (50 basis points) in the second part of the year. Thus, the total interest rates can decrease by 1.25% -15% throughout the financial year. By March 2026, interest rates can go below the ‘neutral rate’ by March 2026.
Golden opportunity for RBI
SBI Research has described it as a ‘Goldenlox period’ to reduce interest rates for RBI, as inflation is low and economic growth (nominal GDP) is estimated to be between 9-9.5%. In such a situation, RBI will have a great opportunity to cut interest rates.
What are possible challenges?
Due to decrease in interest rates, bank deposit rates will also be reduced, which can reduce bank deposit growth. At the same time, the demand for loan will increase when the interest rates are reduced, which can increase the credit-detail difference. However, due to RBI’s open market operations (OMO) and good dividend transfer, there will be no problem of liquidity in the market. Bond yield can remain around 6%.
There will be a big decrease in home loan rates
Currently, Union Bank of India and Central Bank of India are giving home loans to customers with 800+ credit scores at the rate of 7.85%. According to the SBI report, if the repo rate decreases to 1.25% to 4.75%, home loan rates may also fall. In such a situation, the interest rates of home loan can reach 6.6%.
