India’s central bank, the Reserve Bank of India (RBI), has lowered its key lending rate by a quarter percentage point, setting the repo rate at 6 percent. This decision aims to ease borrowing costs for financial institutions, ultimately leading to more affordable loan payments—known as EMIs—for individuals.
The announcement came from RBI Governor Sanjay Malhotra, who confirmed that the Monetary Policy Committee reached a unanimous agreement on this reduction. It marks the second rate adjustment this year; in February, the rate was previously lowered to 6.25 percent.
The repo rate, essentially the interest rate at which the RBI lends money to commercial banks, influences broader economic conditions. A decrease typically translates to lower rates for consumers and businesses.
Malhotra highlighted concerns about the current global economic climate, noting that “the financial year begins on an anxious note.” The RBI is carefully monitoring potential inflationary pressures stemming from international uncertainties, particularly in light of recent trade tensions with the United States.
“The dent on global growth due to trade frictions will impede domestic growth,” Malhotra stated. “Higher tariffs may have an impact on net exports. India is very proactively engaging with the US administration on trade.” While quantifying the precise impact remains challenging, the central bank expressed confidence in its ability to manage domestic economic expansion.
Despite these global headwinds, the Governor emphasized positive indicators within the Indian economy:
- The agricultural sector continues to show promise.
- Manufacturing activity is exhibiting signs of renewed strength.
- The services sector demonstrates ongoing stability and resilience.
- Urban consumption is improving, with a noticeable increase in discretionary spending.
Furthermore, Malhotra noted the “healthy” financial standing of both banks and corporate entities.
Finally, the Monetary Policy Committee observed that inflation remains below its target level, largely attributed to a significant decline in food prices.
“We are not concerned about being able to manage domestic growth,” Malhotra concluded.
