• Notification Date: 07-02-2025
• Notification No: N/A

RBI Cuts Repo Rate by 25 Basis Points to 6.25 Percent, First Cut in 5 Years

The Reserve Bank of India (RBI) has forward cut the repo rate by 25 basis points to leave it at 6.25%. This is the first cut in five years since the last cut that happened in May 2020. The Reserve Bank of India's Monetary Policy Committee has taken the decision with an aim to strengthen borrowing, investing, and consumption for the enhancement of economic activity.

This cut, announced by RBI Governor Sanjay Malhotra, is coming a week after the Centre's personal income tax cuts and will bring much relief to the borrowers at least in reducing their equated monthly installments, or EMIs. It is going to maintain its stance "neutral", while cutting the rates for itself so that it could keep its flexibility to what is evolving before it in the macroeconomic situation.

It has said that the steady external account will support GDP growth at 6.7% in fiscal 2025-26 as India continues on its trend of fiscal consolidation. It currently has recorded the slowest growth pace over the past four years, and its growth put at 6.4% for fiscal 2024-25.

On inflation, it expects retail to come in at 4.2% in FY26 and ease steadily over the year. On CPI-based inflation, which came in at 5.22% in December, RBI expects it will gradually align itself with the target in the following year. Among the other factors mentioned by Governor Malhotra are a rising dollar, increasing geopolitical tensions, and volatile financial markets. He said India's economy is okay, and RBI will not hesitate to give all that it can to resolve issues at hand by using all its instruments.

Through this action, RBI expects growth while keeping the inflation level under control in a pretty tough global environment.