As widely expected, the RBI has announced repo rate cut. The Monetary Policy Committee (MPC) of the RBI unanimously decided to reduce the repo rate by 25 basis points to 6 percent, Governor Sanjay Malhotra told mediapersons on Wednesday.
This marks the second rate cut this year. In February, the central bank had lowered the rate to 6.25 percent from 6.5 percent—its first cut in nearly five years.
The standing deposit facility (SDF) rate has been adjusted to 5.75 percent from 6 per cent, and the marginal standing facility (MSF) rate to 6.25 per cent from 6.5 percent.
The MPC has shifted to an ‘accommodative’ stance. A neutral stance allows the central bank to either increase or decrease rates based on inflation and growth dynamics, whereas an accommodative stance focuses on supporting economic growth by lowering interest rates. And, a withdrawal of accommodation typically aims to control inflation through rate hikes or tighter monetary policy.
India’s retail inflation remained moderate, standing at 3.61 percent in February 2025, well below the RBI’s 4% target. With inflation under control, policymakers have shifted focus towards sustaining economic growth, especially in the context of global trade uncertainties. The repo rate reduction comes amid the United States’ imposition of a 26 per cent tariff on Indian imports, fuelling concerns about the outlook for India’s export-driven sectors.
The repo rate is the interest rate at which the RBI lends short-term funds to commercial banks against government securities. A reduction in this rate lowers borrowing costs for banks, which, in turn, can offer loans at reduced interest rates to businesses and consumers.
Lower interest rates typically encourage business expansion, infrastructure development, and consumer spending, as borrowing becomes more affordable. However, monetary easing is undertaken only when inflation remains within acceptable limits and additional liquidity is necessary to support economic growth.
The RBI holds six bi-monthly meetings each financial year to assess key economic indicators, including interest rates, money supply, and the inflation outlook. During its last meeting on February 7, the MPC unanimously cut the policy repo rate by 25 basis points—from 6.5% to 6.25%—marking the first rate cut in nearly five years.
