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The Reserve Bank of India (RBI) has announced a 25 basis point cut in the repo rate, bringing it down to 6.25%. This decision was made during the RBI's Monetary Policy Committee (MPC) meeting on Friday. RBI Governor Sanjay Malhotra confirmed that the policy stance will remain “neutral.”
First Interest Rate Cut Since COVID-19
This is the first time the RBI has reduced the repo rate since the COVID-19 pandemic. In May 2020, the RBI had made a series of cuts, lowering the repo rate to 4%. The repo rate remained at 4% until April 2022 when the RBI started increasing it. The rate went up to 6.5% by February 2023 and has stayed unchanged until this latest cut.
Impact on Economy and Inflation
Along with cutting the repo rate, the RBI also lowered the Standing Deposit Facility (SDF) and the Marginal Standing Facility (MSF) rates by 25 basis points each, making them 6% and 6.5%, respectively. The bank rate was also reduced to 6.5%.
Governor Sanjay Malhotra said that India’s economy is still strong but also facing challenges from global factors. He also mentioned that food inflation is expected to reduce with the arrival of new crops.
This move is expected to make borrowing cheaper, helping businesses and consumers. The RBI is trying to support economic growth while managing inflation at the same time.
