RBI Cuts Repo Rate by 0.25% to Boost Growth + UPSC?.ToString()?? UPSC?.ToString()+" Current Affairs";

Why in the News?
The Reserve Bank of India (RBI), in its first monetary policy review under Governor Sanjay Malhotra, cut the repo rate by 25 basis points (bps) to 6.25%. This marks the first rate cut since May 2020 and aims to support economic growth amid easing inflation projections. The move is expected to make home, car, and other loans cheaper, aligning with the Union Budget’s focus on stimulating urban demand through income tax breaks.
Key Takeaways
Repo Rate Cut: The RBI reduced the repo rate by 25 bps to 6.25%, the first cut in nearly four years.
Growth Focus: The rate cut aims to boost economic growth, with GDP projected at 6.7% for 2025-26, up from 6.4% in 2024-25.
Inflation Outlook: Inflation is expected to ease to 4.4% in the current quarter and average 4.2% through 2025-26.
Liquidity Measures: The RBI announced initiatives to address the recent liquidity crunch, ensuring orderly market conditions.
Global Risks: The MPC highlighted risks from geopolitical tensions, volatile commodity prices, and financial market uncertainties.
Do You Know?
Repo Rate: It is the rate at which the RBI lends to commercial banks. A cut in the repo rate reduces borrowing costs for banks, which can pass on the benefits to consumers through lower loan rates.
Basis Point (bps): One basis point equals 0.01%. A 25 bps cut means a 0.25% reduction in the repo rate.
MPC’s Inflation Target: The RBI aims to keep inflation at 4%, with a tolerance band of 2-6%.
Static Points about Monetary Policy Committee (MPC)
Established: 2016 under the RBI Act, 1934.
Composition: Six members, including the RBI Governor, Deputy Governor, and external experts appointed by the government.
Mandate: To maintain price stability while supporting growth by setting benchmark interest rates.
Meetings: Held bi-monthly to review monetary policy.
Key Tools: Repo rate, reverse repo rate, cash reserve ratio (CRR), and statutory liquidity ratio (SLR).
The Road Ahead
The RBI’s decision to cut the repo rate reflects its commitment to balancing growth and inflation. With inflation projected to ease and GDP growth expected to rise, the rate cut is a timely move to stimulate consumption and investment. However, global uncertainties and domestic liquidity challenges remain key concerns. As the RBI continues to monitor economic conditions, its proactive measures will play a crucial role in sustaining India’s economic resilience.