RBI Cuts Repo Rate for the First Time in Five Years

In a significant move, the Reserve Bank of India (RBI) announced a 25 basis points cut in the repo rate on Friday, marking the first reduction in nearly five years. This decision is expected to make loans cheaper for millions of home loan and small loan customers with floating rates.

Sanjay Malhotra, the 26th governor of the RBI, who took over in December, stated that the move was influenced by easing inflation and concerns over global risks slowing growth. This rate cut follows the significant tax relief announced in the 2025-26 Budget and is anticipated to boost consumption.

Impact on Borrowers and the Economy

The reduction in the repo rate is expected to immediately lower borrowing costs, providing relief to borrowers and potentially stimulating economic growth. The Monetary Policy Committee (MPC) has decided to continue with a neutral stance, assessing that a less restrictive monetary policy is appropriate at this time.

"Considering the existing growth-inflation dynamics, the MPC, while continuing with the neutral stance, felt that a less restrictive monetary policy is more appropriate at the current juncture. The MPC will take a decision in each of its future meetings based on a fresh assessment of the macroeconomic outlook," Malhotra explained in his monetary policy statement.