The Reserve Bank of India (RBI) has cut the repo rate by 25 basis points, which means it has reduced the interest rate at which it lends money to banks. The new rate is now 6%. This decision was made on Wednesday after the RBI’s Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, finished its three-day meeting that began on April 7.

"After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6% with immediate effect," said Sanjay Malhotra.

This is the second time in a row that the RBI has cut the repo rate. A similar 25 basis point cut was made in February. It is also the second major policy announcement by Sanjay Malhotra since he became RBI Governor in December 2024.

The rate cut comes at a time when inflation has gone below 4%, and there are worries about slower economic growth. To encourage spending and investments in the economy, the RBI decided to lower the interest rate. Along with the repo rate, the standing deposit facility (SDF) rate was reduced to 5.75%, and the marginal standing facility (MSF) rate was adjusted to 6.25%.

Will home loans get cheaper?

Yes, experts believe this move will benefit people who have taken home loans, especially those with floating interest rates.

CA (Dr.) Suresh Surana explained, "The recent decision by the Reserve Bank of India’s Monetary Policy Committee (MPC) to reduce the repo rate by 25 basis points to 6% is expected to have a favourable impact on home loan borrowers."

He added, "The repo rate, which is the rate at which the RBI lends funds to commercial banks, plays a crucial role in determining the overall cost of borrowing in the economy. A reduction in this rate typically lowers the cost of funds for banks, enabling them to pass on the benefit to consumers through reduced lending rates."

He also said, "For existing borrowers, the benefit would generally be reflected from their loan’s next reset date, which is usually on a quarterly or half-yearly basis. New borrowers, however, may experience the effect more immediately, depending on how promptly individual banks revise their lending rates."

RBI changes stance, cuts growth forecast

The RBI also changed its monetary policy stance from "neutral" to "accommodative" to show that it is open to taking more steps to support growth.

"It also decided to change the stock from neutral to accommodative. It also noted that the rapidly evolving situation requires continuous monitoring and assessment of the economic outlook," said the RBI Governor.

The RBI also lowered its growth forecast for the financial year 2025-26. The new estimate is 6.5%, down from the earlier 6.7% forecast made in February.

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