Mumbai – In a major move that brings relief to millions of borrowers, the Reserve Bank of India (RBI) has slashed the repo rate for the first time in five years. The central bank has reduced the repo rate by 25 basis points, bringing it down from 6.50% to 6.25%. This decision was announced by RBI Governor Sanjay Malhotra following the conclusion of the Monetary Policy Committee (MPC) meeting.
How Will This Impact Borrowers?
With the reduction in the repo rate, borrowing costs will decrease, making home loans, car loans, education loans, and personal loans more affordable. For instance, if the interest rate on a 20-year home loan of Rs 30 lakh was previously 9%, it will now be reduced to 8.75%. This reduction means lower EMIs, providing financial relief to borrowers across the country.
A Landmark Decision Under New Leadership
This was the first MPC meeting after Sanjay Malhotra took over as the RBI Governor in December 2024, succeeding Shaktikanta Das. While the Cash Reserve Ratio (CRR) was cut to 4% in December, the repo rate remained unchanged until now. The latest cut signals a shift in monetary policy, aimed at boosting economic growth and easing financial stress on consumers.
Stock Market Reacts
Despite the positive impact on borrowers, the stock market responded with a decline following the repo rate cut. Market analysts suggest that investor concerns over potential lower banking margins and economic implications may have contributed to the downturn.
What is Repo Rate?
The repo rate is the interest rate at which commercial banks borrow funds from the RBI for short-term liquidity needs, using government securities as collateral. A lower repo rate encourages banks to lend more affordably, stimulating economic activity.
What’s Next?
The repo rate cut is expected to enhance liquidity in the economy and drive consumption. Experts believe that further rate cuts could be on the horizon, depending on inflation trends and economic conditions.
For borrowers, this is a welcome relief, and financial institutions are likely to soon announce revised interest rates for various loan categories. As India navigates its economic growth trajectory, this repo rate cut marks a significant step towards financial stability and affordability.
Also Read : South Indian Actresses: Beauty with Brains, Conquering Bollywood with Intelligence and Talent
