RBI cuts policy rate 25 bps to 6%.
Mumbai: The Reserve Bank of India (RBI) on Wednesday cut the key policy interest rate by 25 basis points, reducing the repo rate from 6.25 per cent to 6 per cent. This marks the second consecutive rate cut, aimed at supporting the slowing economy amid rising global uncertainties and fresh trade tensions with the United States.
The Monetary Policy Committee (MPC) voted unanimously in favor of the cut, reflecting concern over emerging economic risks. RBI Governor Sanjay Malhotra stated that the move was essential to bolster economic activity as external headwinds such as geopolitical conflicts, supply chain disruptions, and volatile financial markets pose threats to India’s growth trajectory.
With this latest reduction, home, auto, and business borrowers may benefit from lower lending rates, potentially boosting demand across key sectors. Experts anticipate that banks will soon align their interest rates with the RBI’s revised stance, making credit cheaper and more accessible.
This rate cut follows a similar 25 bps reduction in February, which brought the repo rate down from 6.5 per cent to 6.25 per cent. Prior to this, the last reduction was seen in May 2020, while the most recent hike occurred in February 2023.
Alongside the rate revision, the RBI also trimmed its GDP growth forecast for the current fiscal year to 6.5 per cent from the earlier projection of 6.7 per cent. The revision reflects increasing concerns about the impact of global developments on domestic economic momentum.
The downgrade comes days after U.S. President Donald Trump imposed a sharp 26 per cent reciprocal tariff on Indian imports, effective April 9. The escalation in trade tensions has further intensified pressure on India’s export performance and macroeconomic stability.
Although domestic consumption and investment remain resilient, the RBI emphasized that global volatility, including rising crude oil prices and uncertain export markets, could dampen economic progress. Inflation, for now, remains under control, giving the central bank the flexibility to pursue an accommodative policy stance.
Analysts believe that the RBI’s back-to-back rate cuts signal a proactive approach to managing risks and stimulating economic activity. The central bank reiterated its commitment to supporting growth while closely monitoring inflation trends and international developments.
Governor Malhotra indicated that the RBI will continue to act as needed to preserve financial stability and guide the economy through ongoing global turbulence. As India navigates a complex external environment, the central bank’s focus remains on maintaining macroeconomic balance and ensuring a sustainable recovery path.