Hyderabad: The RBI repo rate cut by 25 basis points marked a major move to support India’s economic growth. The Monetary Policy Committee, chaired by RBI Governor Sanjay Malhotra, voted unanimously to reduce the rate from 5.5 percent to 5.25 percent. This decision came amid improving macroeconomic indicators and stable inflation levels.
Governor Malhotra said the central bank initiated additional steps to strengthen liquidity. The RBI will purchase ₹1 lakh crore worth of government securities through open market operations. He also announced a dollar–rupee swap of up to USD 5 billion to further ease conditions in the financial system.
Economic growth reached 8.2 percent in the second quarter of the current financial year, while inflation dropped to 1.7 percent. Malhotra described the period as a “golden phase” for India’s economy. With inflation staying within a comfortable range, he said the rate cut became feasible. As a result, the RBI revised the GDP growth forecast from 6.8 percent to 7.3 percent.
RBI repo rate cut supported by stable inflation and strong forex reserves
The central bank will continue with a neutral policy stance. Malhotra recalled that interest rates remained unchanged in the August and October reviews due to inflation risks. India’s foreign exchange reserves touched a record USD 686 billion, enough to cover 11 months of imports. However, he warned that global trade uncertainty and geopolitical tensions still posed risks to the economy.
The RBI repo rate cut may allow banks to reduce lending rates. The final impact, however, will depend on how quickly commercial banks pass on the benefits to borrowers.