RBI Cuts Repo Rate by 0.25% to Boost Growth, Loans Likely to Get Cheaper

Mumbai, 9th April 2025: The Reserve Bank of India (RBI) has announced a 0.25% cut in the repo rate, bringing it down from 6.25% to 6%. This decision, taken during the first Monetary Policy Committee (MPC) meeting of the new financial year, is expected to make loans cheaper and reduce monthly EMIs for borrowers.

RBI Governor Sanjay Malhotra made the announcement at a press briefing held at 10 am, concluding the three-day meeting that began on April 7. The rate cut was unanimously approved by all six members of the committee.

“The committee has shifted its stance from ‘neutral’ to ‘accommodative’ to support growth, especially amid global trade uncertainties and domestic challenges,” said Governor Malhotra.

This is the second consecutive rate cut by the RBI in 2025. In its February meeting, the central bank had lowered the repo rate from 6.5% to 6.25%, marking the first rate cut in nearly five years.

What the Repo Rate Cut Means
The repo rate is the interest rate at which the RBI lends short-term funds to commercial banks. A reduction in this rate makes borrowing cheaper for banks, who often pass on the benefit to customers by lowering interest rates on loans such as housing, auto, and personal loans.

Financial analysts say this move is likely to boost demand in sectors like real estate and automobiles, where lower EMIs can significantly improve affordability for consumers.

Inflation Under Control, But Growth Concerns Loom
The RBI cited falling crude oil prices and easing food inflation as key reasons for easing the policy rate. Retail inflation dropped to 3.61% in February 2025 — the lowest in seven months — mainly due to a decline in prices of pulses and vegetables. However, wholesale inflation rose slightly to 2.38%, attributed to increased manufacturing costs in the food sector.

The RBI also flagged concerns over global trade tensions and higher tariffs impacting Indian exports. “Domestic growth could face headwinds if global trade slows down further,” said Malhotra, adding that there were early signs of recovery in manufacturing activity.

Other Key Announcements
The National Payments Corporation of India (NPCI) will now be responsible for setting transaction limits on UPI payments between consumers and merchants.Currently, the limit for such payments is ₹2 lakh.
New regulatory guidelines will soon be issued for gold loans.
The next five MPC meetings for FY 2025-26 have been scheduled, with one meeting every two months.

GDP and Economic Outlook
While the RBI did not announce a specific GDP growth estimate for FY 2025-26 during this briefing, economists expect growth to remain moderate amid global uncertainties. The central bank is expected to provide a full outlook in its next policy update.

The Monetary Policy Committee consists of six members — three from the RBI and three appointed by the central government. The committee meets every two months to review key interest rates and economic indicators.