New Delhi (Rajeev Sharma): The Reserve Bank of India (RBI) on Friday announced a reduction in the repo rate by 25 basis points, lowering it from 5.5% to 5.25%, in a unanimous decision by the Monetary Policy Committee (MPC). The move is expected to make loans more affordable for retail and corporate borrowers alike.
RBI Governor Sanjay Malhotra explained that the decision follows careful consideration of easing inflationary pressures and the recent depreciation of the rupee, which reached its lowest level yesterday. “The MPC evaluated the current economic landscape and concluded that a moderate reduction in the repo rate would support growth while keeping inflation under control,” he said.
Impact on borrowers and credit
A cut in the repo rate often translates into lower lending rates by banks, reducing the equated monthly installments (EMIs) for home, vehicle, and personal loans. Borrowers with floating-rate loans stand to benefit most, as banks typically adjust their interest rates in line with changes in the central bank’s key rate.
Financial experts believe that this step could boost consumer spending and stimulate demand, particularly in sectors that rely heavily on credit. “With inflation at relatively low levels, the RBI has created room for economic growth without triggering price instability,” said Anjali Mehta, senior economist at a leading financial consultancy.
A continuation of accommodative policy
This reduction marks the second repo rate cut of the year, following the MPC’s June decision to lower the rate from 6% to 5.5%. The committee meets every two months to review the nation’s monetary stance, balancing the twin goals of growth and price stability.
Governor Malhotra noted that the committee will continue to monitor economic indicators closely, including global developments and currency fluctuations, to ensure that the financial system remains resilient.
Outlook
The rate cut is likely to be welcomed by both businesses and households, providing some relief amid rising costs and global uncertainties. Analysts expect that banks will pass on the reduction gradually over the coming weeks, offering borrowers tangible savings on EMIs.
As the RBI signals a growth-oriented approach, the move reflects its intent to support the economy while keeping inflation within target, marking another step in India’s carefully calibrated monetary policy for the year.
