New Delhi, 7 February 2025: Barely a week after the Centre reduced personal income tax to spur consumption, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) lowered the repo rate by 25 basis points to 6.25%, marking the first rate cut since 2020.
The repo rate, which was previously held at 6.5% for 11 consecutive policy meetings, dictates the rate at which the RBI lends to banks.
The decision came during the MPC’s February 5–7 meeting, the first under RBI Governor Sanjay Malhotra, who took office in December 2024 following Shaktikanta Das’s tenure.
All six committee members unanimously voted in favor of the cut, a move that markets had been anticipating.
Experts mentioned that the rate reduction aligns with the budget’s broader economic goals, balancing fiscal prudence while supporting growth.
Lower borrowing costs are expected to boost liquidity in the banking system, making home loans more affordable and improving sentiment in the real estate sector, particularly among lower- and mid-income buyers.
The RBI also maintained its projection for consumer price index (CPI)-based inflation at 4.8% for FY25 and pegged GDP growth at 6.7% for FY26.
