RBI Cuts Repo Rate to 6%: Second Consecutive Reduction Amid Economic Uncertainty

RBI's decision to reduce the repo rate to 6% and shift to an accommodative stance, aiming to boost economic growth amidst global pressures.
RBI Cuts Repo Rate to 6%: Second Consecutive Reduction Amid Economic Uncertainty
RBI The Bridge Chronicle
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The Reserve Bank of India (RBI) has reduced the repo rate by 25 basis points (bps) for the second consecutive time, bringing it down to 6% from 6.25%. This decision, announced by RBI Governor Sanjay Malhotra on April 9, 2025, reflects the central bank’s efforts to stimulate economic growth amidst global uncertainties, particularly the impact of U.S. tariffs on Indian exports.

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The repo rate, which is the interest rate at which the RBI lends money to commercial banks, has been lowered by 25 bps to 6%. This marks the second consecutive cut after a similar reduction in February 2025. RBI has shifted its monetary policy stance from neutral to accommodative, signaling a proactive approach to support economic growth. This stance implies that future decisions will focus on either maintaining the current rate or implementing further cuts.

RBI Cuts Repo Rate to 6%: Second Consecutive Reduction Amid Economic Uncertainty
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India’s retail inflation, measured by the Consumer Price Index (CPI), has eased to 3.61% in February 2025, below the RBI’s target of 4%. This favorable inflation outlook has provided room for the RBI to focus on growth. The decision is influenced by global economic uncertainties, including the U.S. tariffs imposed on Indian exports. These tariffs pose risks to India’s GDP growth projections for FY26.

The repo rate cut is expected to reduce borrowing costs for individuals and businesses, potentially leading to cheaper home loans and personal loans. While borrowers may benefit, fixed deposit investors might see lower returns as banks adjust their deposit rates to maintain margins. The announcement led to a slight decrease in the 10-year bond yield and a marginal decline in the rupee against the dollar.

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