The Reserve Bank of India (RBI) has cut the benchmark interest rate, or repo rate, by a quarter-percentage point to 6%. This decision was made by the central bank’s Monetary Policy Committee (MPC), chaired by Governor Sanjay Malhotra, following their three-day meeting that concluded on April 7.
The rate cut comes as inflation has dipped below the 4% target, but concerns are mounting over slowing economic growth. The central bank aims to bolster domestic demand and spur investment through this decision.
Specifically, the RBI has adjusted the standing deposit facility (SDF) rate under the liquidity adjustment facility to 5.75%. Additionally, the marginal standing facility (MSF) rate has been set at 6.25%.
This revised rate structure is intended to provide monetary policy support during the current economic conditions.
“After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6% with immediate effect,” Malhotra was quoted as saying.
Experts believe the recent decision by the Reserve Bank of India’s Monetary Policy Committee (MPC) to reduce the repo rate by 25 basis points to 6% is expected to positively impact home loan borrowers.
The repo rate, which is the rate at which the RBI lends funds to commercial banks, determines the overall cost of borrowing in the economy. A reduction in this rate lowers the cost of funds for banks, enabling them to pass on the benefit to consumers through reduced lending rates, he explained.
Given the prevalence of home loans tied to external benchmarks like the RBI’s repo rate, a downward revision would likely lead to reduced interest rates for borrowers, especially those with floating-rate loans.
