RBI May Cut Repo Rate by 25 Basis Points in February 2026

Loan borrowers might get some relief again in February 2026. According to a latest report by Union Bank of India, the Reserve Bank of India (RBI) could reduce the repo rate by 25 basis points in its monetary policy committee (MPC) meeting in February 2026. If this happens, the repo rate will drop to 5%, and home loan, car loan, and personal loan EMIs are expected to become cheaper.

RBI's Current Soft Stance and Possibility of Further Rate Cut

The report indicates that, considering RBI's current soft stance on inflation, there is a possibility of a final 25 basis points rate cut in February or April 2026. The RBI's MPC meeting is scheduled to be held between February 4 and 6, and all eyes are on this meeting.

Impact of Gold Price and Inflation on RBI's Decision

According to Union Bank's report, inflation seems to be under control, which works in favor of the RBI. The central bank has previously indicated that favorable inflation and reduced pressure from basic prices give room for policy easing. The report also mentions that if the inflationary impact of gold prices, which accounts for about 50 basis points, is adjusted, the inflationary pressure appears further limited.

Two Revisions Likely to Impact RBI's Final Decision

However, the report clarifies that the timing of the final rate cut is not yet certain. One major factor is the proposed revision of the Consumer Price Index (CPI) and Gross Domestic Product (GDP) base year, which is set to happen in February 2026. This change could influence the RBI's decision.

Recent RBI Rate Cut and Market Expectations

It is worth noting that in the MPC meeting held in early December, the RBI had already reduced the repo rate by 25 basis points, bringing it down to 5.25%. Now, the expectation of another rate cut has raised new hopes among loan borrowers and the market alike.