RBI Cuts Repo Rate: MPC Reduces Rate by 50 Basis Points to 5.5%, GDP Growth Projection at 6.5%
New Delhi: The Reserve Bank of India (RBI) has taken a major policy decision following the latest meeting of the Monetary Policy Committee (MPC). RBI Governor Sanjay Malhotra announced a 50 basis point cut in the repo rate, bringing it down to 5.5%. This decision was made under the Liquidity Adjustment Facility (LAF) and has come into immediate effect.
Adjustment in Other Policy Rates:
Alongside the repo rate cut, the Governor announced the following changes:
The Standing Deposit Facility (SDF) rate has been adjusted to 5.25%.
The Marginal Standing Facility (MSF) rate and the Bank Rate have been aligned to 5.75%.
Economic Growth Forecast:
Governor Sanjay Malhotra shared the GDP growth outlook for the financial year 2025–2026, maintaining a real GDP growth projection of 6.5%, in line with previous estimates. The quarterly breakdown is as follows:
Q1: 6.5%
Q2: 6.7%
Q3: 6.6%
Q4: 6.4%
He emphasized that the risks to growth remain evenly balanced.
Why the Rate Cut?
The cut in the repo rate is aimed at boosting economic activity. Lower interest rates could reduce borrowing costs for businesses and individuals, thereby stimulating investment and consumption. Analysts believe this move comes amid signs of easing inflation and concerns over global economic uncertainty.
Expected Impact:
Likely reduction in home loan, auto loan, and personal loan interest rates.
Enhanced consumer spending and investment sentiment.
Easier access to finance for MSMEs and startups.
RBI’s move is being seen as a significant step towards strengthening the economy and maintaining growth momentum. All eyes are now on how swiftly commercial banks respond by adjusting their lending rates in line with the central bank’s decision.
