RBI cuts repo rate to 6 per cent to support growth amid global uncertainties

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The Reserve Bank of India (RBI) has cut the benchmark repo rate by 25 basis points, bringing it down from 6.25 per cent to 6 per cent. The announcement was made following a three-day meeting of the Monetary Policy Committee (MPC) that concluded on 9 April.

As per ANI, this is the second consecutive rate reduction this year, following a similar 25-bps cut in February. RBI Governor Sanjay Malhotra stated that the decision was unanimous and aimed at supporting economic revival amid global headwinds. "After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6 per cent with immediate effect," said Malhotra.

The Governor highlighted the volatile global economic environment, noting that trade tariffs and geopolitical uncertainties have intensified pressures on inflation and growth across regions. "The global economic outlook is fast changing. Recent trade tariff-related measures have exacerbated uncertainties, clouding the economic outlook across regions, posing new headwinds for global growth and inflation. Amidst this turbulence, the US dollar has weakened appreciably," he observed.

Domestically, Malhotra mentioned that while growth in India is recovering after a sluggish first half of FY 2024-25, it remains below desirable levels. "Growth is improving, although it still remains lower than what we aspire for," he added.

In line with the repo rate revision, the RBI also adjusted the key rates under the Liquidity Adjustment Facility (LAF). As per ANI reports, the Standing Deposit Facility (SDF) rate now stands at 5.75 per cent, while both the Marginal Standing Facility (MSF) rate and the Bank Rate have been revised to 6.25 per cent.

On the inflation front, the central bank painted a more positive picture. The MPC acknowledged a notable dip in food inflation and projected a durable alignment of headline inflation with the 4 per cent target over the next year. "There is now greater confidence of a durable alignment of headline inflation with the target," Malhotra noted.

In reaction to the announcement, Anuj Puri, Chairman of ANAROCK Group, said the move was broadly anticipated due to moderating inflation levels. However, he cautioned that home loan borrowers may not see immediate relief unless banks choose to pass on the benefit of these cuts. "Many banks have not transmitted earlier MPC rate cuts to borrowers due to higher funding costs, net interest margin pressures, and cautious lending sentiment," he stated.

According to ANAROCK Research, housing prices have continued to rise, with Q1 2025 witnessing a year-on-year average increase of 17 per cent across the top seven cities. NCR and Bengaluru saw the steepest rises at 34 per cent and 20 per cent, respectively.

Puri added that if lenders do pass on the benefit, it could significantly encourage first-time homebuyers, especially in the affordable housing segment. He advised existing borrowers to negotiate lower rates or consider transferring their home loans but warned that relief could be partial at best. "Any EMI reduction should ideally be used for prepayment or investment, rather than increased consumption," he advised.

(With inputs from ANI)