The Reserve Bank of India (RBI) on Friday reduced the key policy rate repo by 0.25 per cent to 5.25 per cent, taking into account the macroeconomic situation and global conditions. RBI has made this cut in the policy rate amidst strong economic growth and softening of inflation.
Along with this, RBI increased the economic growth estimate for the current financial year from 6.8 percent to 7.3 percent. Apart from this, the inflation rate estimate has been reduced from 2.6 percent to 2 percent.
In this way, till now the repo rate has been reduced by a total of 1.25 percent in the year 2025. Earlier, the central bank had cut the repo rate by a total of one percent from February to June this year. Whereas in the monetary policy review in August and October, the repo rate was kept constant at 5.5 percent.
Giving information about the decisions taken in the three-day meeting of the six-member Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said, “The MPC has unanimously decided to reduce the repo rate by 0.25 per cent to 5.25 per cent.” He said that along with this the stance of monetary policy has been kept neutral.
This means that the central bank will remain flexible in adjusting the policy rate according to the economic situation. Repo is the interest rate at which commercial banks borrow from the central bank to meet their immediate needs. Due to reduction in repo rate, there is a possibility of change in interest on housing, vehicle and other retail loans.
RBI has increased the estimate of gross domestic product (GDP) growth rate for the financial year 2025-26 from 6.8 percent to 7.3 percent.
At the same time, the estimate of retail inflation for the current financial year was reduced to 2.0 percent whereas earlier it was estimated to be 2.6 percent.