Breaking News: India Press Live Reports RBI Cuts Repo Rate to 6%
The Reserve Bank of India (RBI) has made a significant move by reducing the repo rate by 25 basis points, bringing it down to 6%. This decision, announced by RBI Governor Sanjay Malhotra during the first Monetary Policy Committee (MPC) meeting of FY26 held from April 7 to 9, is aimed at easing borrowing costs for individuals and businesses. This marks the second consecutive cut following a similar rate reduction in February.
Understanding the Repo Rate
The repo rate is the interest rate at which the RBI provides short-term funds to commercial banks, usually against government securities. It serves as a crucial tool for the central bank to manage inflation and liquidity in the economy.
Reasons Behind the Rate Cut
The RBI typically decreases the repo rate to infuse more liquidity into the system and stimulate economic growth, particularly when inflation is under control. For FY26, the RBI has forecasted Consumer Price Index (CPI) inflation at 4%, well within its target range of 2-6%. Moreover, global uncertainties stemming from trade tensions, particularly due to US President Donald Trump’s reciprocal tariffs, have played a role in influencing this decision as they pose risks to global growth and India’s exports.
Impact on Borrowers and Investors
- Loan Borrowers: With the repo rate cut, banks can borrow funds from the RBI at a lower cost, potentially leading to reduced interest rates on home loans, auto loans, and personal loans. The actual decrease in EMIs will depend on how individual banks pass on these benefits to consumers.
- Fixed Deposits: While borrowers may benefit from lower rates, FD investors might see a decline in returns as banks may lower interest rates on deposits to maintain margins. New FD investors may earn lower returns compared to those who invested earlier at higher rates.
- Personal Loans: Existing personal loan borrowers with fixed interest rates may not see a change in their EMIs. However, new borrowers could enjoy lower interest rates and more manageable repayments.
Governor Sanjay Malhotra remains optimistic about the Indian economy, projecting a GDP growth of 6.5% for FY 2025-26, with the following quarterly breakdown:
- Q1: 6.5%
- Q2: 6.7%
- Q3: 6.6%
- Q4: 6.3%
He highlighted the promising outlook for the agriculture sector, attributed to healthy reservoir levels and robust crop production. Additionally, the manufacturing and services sectors are showing signs of recovery, urban consumption is on the rise, and investment activity is increasing due to strong corporate and bank balance sheets, along with the government’s focus on infrastructure development.
