Home loans and other borrowings are expected to become more affordable following the Reserve Bank of India (RBI)’s decision to cut the repo rate by 25 basis points to 6 per cent.
The central bank attributed the rate reduction to lower inflation and slower economic growth. Additionally, the RBI revised its growth and inflation projections for FY26, adjusting both by 20 basis points to 6.5 per cent for growth and 4 per cent for inflation.
The decision was made following the conclusion of the central bank’s Monetary Policy Committee (MPC) meeting, which began on April 7, and was led by Governor Sanjay Malhotra.
Governor Malhotra stated, “After a detailed assessment of the evolving of the macroeconomic and financial conditions, and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6 per cent with immediate effect.”
This marks the second consecutive rate cut, following a similar 25 basis point reduction in February. It is also the second major announcement by Sanjay Malhotra since his appointment as RBI Governor in December 2024.
Alongside the repo rate cut, the standing deposit facility (SDF) rate under the liquidity adjustment facility was adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate was set at 6.25 per cent.
“Real GDP is now projected for this fiscal 2025-26 at 6.5 per cent, with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent. While the risks are evenly balanced around these baseline projections, uncertainties remain high in the wake of recent spike in global volatility. The growth projection for the current year has been marked down by 20 basis points relative to our earlier assessment of 6.7 per cent in the February policy. This downward revision essentially reflects the impact of global trade and policy uncertainties,” added Governor Malhotra.
