Good News For Home Loan And Car Loan Customers: RBI Reduced The Repo Rate
RBI Reduced The Repo Rate again– RBI’s Monetary Policy Committee met today. The Reserve Bank of India has decided to reduce interest rates in the meeting. RBI has reduced the repo rate by 25 basis points. This is the second time this year that the repo rate has been reduced.
In February, the repo rate was cut by 25 basis points to 6.50% from 6.25%. The global financial markets have been reeling under the US tariffs. It was expected that the RBI might cut the repo rate to boost growth.
What is the repo rate?
It is the job of the Reserve Bank to oversee the functioning of all the government and private banks operating in the country. The Reserve Bank formulates a policy and provides it to all the banks, on the basis of which the banks operate. These banks borrow from the Reserve Bank. The interest rate they pay to the RBI is called the repo rate. Similarly, when a bank deposits money in the Reserve Bank, the interest it gets is called the reverse repo rate.
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What is the impact if the repo rate is reduced or increased?
The common man does not understand this trick. It seems difficult to understand what happens when the repo rate is increased or decreased. In fact, it is very simple. The lower the repo rate, the more benefit the people will get. A lower repo rate means that the bank has more money in cash. So the bank will charge less interest from you. The loan will also be cheaper. If you get a loan at a lower interest rate, then you will get a home loan, car loan and personal loan at a cheaper rate. The reduction in repo rate provides a huge benefit to the middle class, as it reduces the burden of EMI.
After almost 5 years, the Reserve Bank of India (RBI) has reduced the repo rate. The last time the repo rate was reduced was in May 2020 by 0.40%. After this, the repo rate was increased in May 2022. The last time the repo rate was changed was in February 2023. At that time, it was increased to 6.50%. Since then, there has been no change in it till the last MPC meeting. The last meeting was held in December 2024. The Marginal Standing Facility (MSF) has also been changed from 6.75 to 6.50. It will also provide banks with the guarantee to borrow from the RBI if necessary. The Reserve Bank has estimated that the GDP growth for the year 2026 will be 6.70% and the inflation rate will be 4.8%.
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