RBI cuts lending rate, first in 5 yrs

The Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) cut the repo rate, the rate at which the RBI lends to other banks by 25 basis points to 6.25 per cent. This is the first rate cut initiated by the RBI since 2020 amid growing concerns about economic growth losing momentum. Currently the repo rate is 6.5 per cent.

Editorial: RBI’s rate cut

Experts are of the view that its combined impact of the ‘pro-growth’ Budget, including cut in personal income tax and a supportive monetary policy will help strengthen India’s growth trajectory, support consumption, and drive long-term investments

The MPC, which comprises three RBI members and three external members, had last reduced the repo rate in May 2020 and had kept the rate unchanged in the last 11 policy meetings. In its December, at the Monetary Policy Committee meeting, the RBI kept the repo rate unchanged at 6.5 per cent.

This is the first MPC meeting since Governor Sanjay Malhotra took office in December 2024, following the end of Shaktikanta Das’s tenure. Markets were eagerly awaiting a possible rate cut. During the meeting, which took place between February 5 and 7, MPC members unanimously voted to cut the repo rate.

Commenting on RBI’s Monetary Policy, Harsha Vardhan Agarwal, president, FICCI said, “RBI’s decision to ease the policy rate is a timely and forward-looking step and we hope that the banking sector would follow through on this cue and a lowering of lending rates will be seen.”

The Budget announced last week had laid the foundation for investment-led growth with an emphasis on manufacturing, MSMEs and infrastructure. Today’s rate cut complements these measures.

In order to check cyber security threats, the Reserve Bank on Friday decided that Indian banks will have exclusive internet domain name ‘bank.in’ and non-bank financial entities ‘fin.in’.

Unveiling the last bi-monthly monetary policy of this fiscal year, RBI Governor Sanjay Malhotra said registrations for ‘bank.in’ will commence from April 2025, and going forward ‘fin.in’ will be introduced.