New Delhi, February 7, 2025: The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points, bringing it down to 6.25 percent. This decision was announced by RBI Governor Sanjay Malhotra after the conclusion of the Monetary Policy Committee (MPC) meeting, held from February 5 to 7. The move is expected to make loans cheaper for businesses and individuals.
RBI’s Key Announcements in Monetary Policy
- Repo rate cut: 6.25% (down by 0.25%)
- Standing Deposit Facility (SDF) rate: 6.0%
- Marginal Standing Facility (MSF) & Bank rate: 6.5%
- Policy stance: Neutral
Governor Sanjay Malhotra highlighted that this is his first monetary policy announcement as RBI Governor and emphasized that the Indian economy remains strong despite global challenges.
Why Did RBI Cut the Repo Rate?
The decision to reduce the repo rate was based on multiple factors:
- Inflation Under Control – The MPC noted that inflation has declined, particularly in food prices.
- Economic Growth Focus – RBI aims to support economic expansion while keeping inflation in check.
- Global Economic Slowdown – The world economy is growing at a slower pace, and factors such as a strong US dollar and rising bond yields have impacted developing nations.
- Improving Domestic Conditions – Growth is expected across agriculture, manufacturing, and services sectors. Rural demand is increasing, and employment is on the rise.
India’s GDP Growth Outlook for 2025
The real GDP growth rate projections for the upcoming quarters are:
- Q1 FY26: 6.7%
- Q2 FY26: 7.0%
- Q3 FY26: 6.5%
- Q4 FY26: 6.5%
Malhotra noted that a good Rabi crop, industrial growth, and government initiatives to boost investments would support India’s economy.
What This Means for Borrowers?
With the repo rate cut, banks are likely to reduce lending rates, making home loans, car loans, and business loans cheaper. This is a positive development for borrowers, especially in sectors reliant on credit.
RBI also assured that it will closely monitor global economic conditions and take necessary steps to support growth while maintaining financial stability.
