The Reserve Bank of India (RBI) has announced a 0.25 percent reduction in the repo rate, bringing it down to 6 percent from 6.25 percent. This decision comes alongside a revision of the economic growth rate estimate for the fiscal year 2025-26, adjusting it from 6.7 percent to 6.5 percent. The RBI’s move is expected to lead to lower loan interest rates and, consequently, reduce equated monthly installments (EMIs) for borrowers.
RBI Governor Sanjay Malhotra disclosed this information following a three-day review meeting of the Monetary Policy Committee (MPC) for the new financial year. He emphasized that the MPC unanimously voted to lower the policy rate by 25 basis points, effective immediately. Malhotra highlighted the progress being made in the Indian economy and noted ongoing improvements in economic growth. He acknowledged that the financial year has commenced amid global uncertainties, including U.S. tariffs, indicating that the RBI is closely monitoring these developments.
The Monetary Policy Committee is a key body within the RBI, comprising six members—three from the Reserve Bank and three appointed by the central government. Its primary role is to formulate monetary policy aimed at ensuring price stability and determining critical policy interest rates. The committee convenes every two months to assess economic conditions and adjust policies as necessary.
In summary, the RBI’s decision to reduce the repo rate reflects its commitment to supporting economic growth while addressing current global uncertainties, with implications for lending rates and consumer borrowing.
**What is Repo Rate?**
The repo rate is the interest rate at which banks in India borrow funds from the Reserve Bank of India (RBI). A reduction in this rate enables banks to lower their loan interest rates for customers, resulting in decreased interest payments for borrowers. Consequently, a decrease in the repo rate leads to reduced rates on various loans, such as home, car, and personal loans, facilitating easier access to credit for businesses.
