RBI cuts lending rate by 25 basis points to 6.25%
The Reserve Bank of India has cut the repo rate – the rate at which the RBI lends to other banks – by 25 basis points to 6.25 percent, after keeping it unchanged for two years. This is the first time in five years that the RBI has cut the repo rate, the last being in May 2020.
The announcement was made by RBI Governor Sanjay Malhotra after the decision taken by the RBI’s six-member Monetary Policy Committee (MPC). The decision was taken unanimously, with the aim of stimulating economic activity by making borrowing cheaper. It will further encourage spending and investment.
Announcing the decision, the RBI Governor said that the framework has helped boost the Indian economy over the years, including the challenges faced since the pandemic and average inflation
Since the introduction of the framework, the consumer price index (CPI) has been largely aligned with the target, the Governor added.
“RBI and MPC will continue to improve the macro-economic outcomes in the best interest of the economy using the flexibility embedded in the inflation targeting framework, while responding to the evolving growth-inflation dynamics,” the RBI Governor said, adding that the authorities will refine building blocks of the Framework by making advances in the use of new data, develop more robust models and improving forecasting of key macroeconomic variables.
Additionally, Governor Sanjay Malhotra announced that the central bank estimates GDP growth in the next fiscal year at about 6.7 percent. According to the Economic Survey released before the Budget, the government projected a growth rate of 6.3-6.8 percent for 2025-26 on the back of a “strong external account, calibrated fiscal consolidation and stable private consumption.”
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