RBI Slashes Repo Rate to 6% in April 2025 Amid Global Uncertainty

In a much-anticipated move, the Reserve Bank of India (RBI) announced a 25 basis point rate cut, bringing the key lending rate down from 6.25% to 6%. The decision, unveiled on 9 April 2025, marks the second consecutive reduction this year and reflects the central bank’s shift to an ‘accommodative’ policy stance to support economic growth.

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Why the Rate Cut?

The RBI’s repo rate cut comes amid rising global trade tensions, with the United States imposing a 26% tariff on Indian exports. This uncertainty, a fall in crude oil prices and improving inflation numbers prompted the Monetary Policy Committee to act. CPI inflation has dropped to 4%, down from the earlier estimate of 4.2%, aided by falling food prices and stable fuel costs.

RBI Governor Sanjay Malhotra states that the repo rate cut means lower borrowing costs and more accessible credit. “This policy aims to maintain macroeconomic balance while encouraging growth. Our stance signals that we are prepared to cut further if needed,” he said.

Impact on Borrowers and Markets

So, is a repo rate cut good or bad? For most, it’s good news. The effect of the repo rate cut is already felt, especially in the housing sector. Lower interest rates could lead to cheaper EMIs on home and auto loans, boosting consumer sentiment and encouraging new borrowing.

However, while borrowers cheer, savers might see declining returns on fixed deposits. Experts caution that banks may reduce FD rates to protect margins.

The interest rate cut’s effect on currency was subtle on the markets. The rupee remained relatively stable at ₹86.61 to the US dollar. Meanwhile, the interest rate cut’s effect on the stock market saw mixed reactions, with real estate and banking stocks gaining while broader indices remained cautious due to tariff concerns.

Looking Forward

The RBI’s repo rate cut decision is seen as a strategic response to global economic shocks and a push to revive domestic consumption. With inflation under control and growth projections revised slightly to 6.5% for FY26, further cuts could be on the table. As history shows, a repo rate cut is often a sign of the central bank’s commitment to maintaining economic momentum.

In short, today’s repo rate cut news reminds us of the RBI’s balancing act, nurturing growth while keeping inflation in check in an uncertain world.