New Delhi: Home loans and other borrowings are going to be cheaper with the Reserve Bank of India's monetary policy committee (MPC) bringing down its policy rate by 25 basis points.

Following the announcement, the policy repo rate— the rate at which RBI lends to banks—stands reduced to 6.0% from 6.25%, the lowest since November 2010. Consequently, the reverse repo rate—the rate at which RBI borrows from banks stands adjusted to 5.75%.

"Recognising that inflation is expected to rise from the current lows (1.54% in June) over the rest of the year, the MPC persevered with the neutral stance," RBI governor Urjit Patel said. "Government and RBI are working in close coordination to resolve large stressed corporate borrowers and recapitalise PSBs within the fiscal deficit target," he added.

Lowering of the repo rate by RBI is a signal to lenders to bring down their rates. "India's inflation has undergone a structural shift, with the emergence of 'new normal' at lower levels. This reinforces my view of room for incremental rate cuts to the tune of 50-75 bps in coming months," said Rana Kapoor, MD & CEO, Yes Bank.

Patel however said that it was not yet clear whether the reduction in inflation was caused by temporary factors or a structural change. It also warned that it will continue to be vigilant in respect of inflation which was likely to rise from present levels.

The governor also made a strong pitch to states to ease bottlenecks to facilitate affordable housing which would boost growth. "I think, we need a time-bound, single window clearance by state governments of this very important initiative, which has the potential for growth," said Patel.