The Monetary Policy Committee under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points from 6.50 per cent to 6.25 per cent with immediate effect.
This decision was came after its 53rd meeting from February 5 to 7, 2025. The MPC committee made up of six member, they are Shri Sanjay Malhotra, Dr. Nagesh Kumar, Shri Saugata Bhattacharya, Prof. Ram Singh, Dr. Rajiv Ranjan, and Shri M. Rajeshwar Rao.
According to Monetary Policy Committee statement, “After assessing the current and evolving macroeconomic situation, the MPC unanimously decided to:
• reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.25 per cent with immediate effect; consequently, the standing deposit facility (SDF) rate shall stand adjusted to 6.00 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.50 per cent;
• continue with the neutral monetary policy stance and remain unambiguously focussed on a durable alignment of inflation with the target, while supporting growth.
These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.”
What is Repo Rate?
The repo rate is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks for short-term borrowing. The term “repo” stands for repurchase agreement, meaning that the banks borrow money from the RBI by selling securities (like government bonds) with an agreement to repurchase them at a later date.
Why does it matter for you?
Cheaper Loans for You:
The most immediate benefit of this rate cut is that it could lead to cheaper loans. Whether you’re planning to buy a home, a car, or simply need a personal loan, lower interest rates mean lower EMIs (Equated Monthly Installments). That means you’ll pay less each month for your loan.
Boost to the Economy:
Lower interest rates encourage people to borrow and spend more, which in turn boosts economic growth. More spending means businesses will likely see higher sales and might even expand, creating more job opportunities for people.
