The Reserve Bank of India (RBI) has announced that its latest decision to reduce the repo rate is now in effect. This follows a previous 25 basis point cut announced during the Monetary Policy Committee (MPC) meeting held on February 7. That marked the first rate cut in nearly five years.
Monetary Policy Committee Meets Every Two Months
The RBI’s MPC convenes every two months to review and adjust key monetary policy parameters. During the February meeting, the committee opted to lower the repo rate by 25 basis points. Now, after two months, the RBI has again moved to cut the rate, signaling a continuation of its accommodative stance.
What is Repo Rate and Why It Matters
The repo rate is the interest rate at which the RBI lends money to commercial banks. When the repo rate is reduced, banks often follow suit by lowering their lending rates. This results in cheaper loans for consumers and lower EMIs on home, car, and personal loans. Following this latest cut, borrowers may see their monthly payments decrease in the near future.
Impact on Home and Auto Loan Borrowers
With banks likely to revise their lending rates, existing and new borrowers could benefit through reduced EMIs. This is good news for consumers planning to buy homes or vehicles, as the overall cost of borrowing could be lower.
RBI Revises GDP Growth Forecast for FY 2025-26
Alongside the repo rate cut, RBI Governor Sanjay Malhotra also shared updated projections for India’s economic growth. Earlier, the RBI had forecasted a 6.7% GDP growth rate for FY 2025-26. That figure has now been revised downward by 20 basis points, placing the new estimate at 6.5%.
Quarter-Wise GDP Growth Outlook for FY26
Here’s how the GDP growth is projected to unfold across the four quarters of FY 2025-26:
- Q1 (April–June): 6.5%
- Q2 (July–September): 6.7%
- Q3 (October–December): 6.6%
- Q4 (January–March): 6.3%
The projections indicate steady growth in the early quarters, with a slight moderation expected in the final quarter.
Conclusion: A Mixed Outlook
While the RBI’s decision to reduce the repo rate brings potential relief to loan borrowers, the trimmed GDP growth forecast suggests a cautious outlook for the economy. The central bank appears focused on balancing growth support with inflation management in the months ahead.