RBI MPC: The Reserve Bank of India (RBI) has announced its sixth and the last bi-monthly monetary policy of Fiscal Year (FY) 2025 today, February 7. The central bank in a major decision has reduced the benchmark repo rate by 25 basis points (bps) to 6.25% from 6.5%. This is the first-rate cut in nearly 5 years, with the last reduction done in May 2020. After that, the central bank has raised interest rates seven times, reaching 6.50%. RBI has kept the benchmark rates has remained unchanged since February 2023.
RBI MPC: How The Repo Rate Cut Impacts Common People?
The repo rate cut leads to more money supply into the economy, improves cash flow, stimulates borrowing, and increase the consumer spending. Furthermore, RBI’s decision may allow industries and individuals to get loans at cheaper interest rates, and cheaper loans can translate into cheaper commodities. However, it demands on how quickly banks will implement repo rate changes on loans. These decisions ultimately impact consumers.
For Example:
- If an individual has taken a home loan at an interest rate of 8.5%. With the 25 BPS rate cut, his/her interest rate can drop to 8.25%.
- If an individual has taken a personal loan at an interest rate of 12%. With the 25 BPS rate cut, his/her interest rate can drop to 11.75%.
- A car loan at an interest rate of 9.5% could down to 9.25% interest rate.
What Else?
This meeting of the Monetary Policy Committee (MPC) was headed by the new RBI Governor, Sanjay Malhotra. It was scheduled from February 5 to 7 and the credit policy decision are announced today, February 7. Notably, this was the first MPC meet under the leadership of Malhotra and also the first after the Union Budget 2025-2026 was presented on February 1. Furthermore, MPC maintained its “neutral” policy stance.
ALSO READ: RBI MPC: Benchmark Repo Rate Reduced By 25 BPS To 6.25% – First Cut In Nearly 5 Years
