RBI reduces repo rate by 25 basis points, EMI costs set to drop

Reserve Bank of India (RBI) Governor Sanjay Malhotra announced on Wednesday that the Monetary Policy Committee (MPC) has unanimously decided to reduce the policy repo rate by 25 basis points to 6%, effective immediately. This reduction is expected to provide relief to borrowers, making equated monthly installments (EMIs) cheaper for home, car, and other loans, easing financial pressure on the middle class.

" The MPC (Monetary Policy Committee) voted unanimously to reduce the policy repo rate by 25 basis points to 6 % per cent with immediate effect," says Sanjay Malhotra.

While the rate cut is welcomed as a positive step for consumers, Malhotra also highlighted ongoing global uncertainties that could weigh on merchandise exports and put additional pressure on the Indian currency. He noted that the global economic outlook is rapidly changing, with recent trade-related measures exacerbating uncertainties, which could cloud the future economic outlook across regions.

On a brighter note, Malhotra shared that concerns regarding Rabi crops have eased, with the latest second advance estimates indicating record wheat production. However, he also adjusted India’s GDP growth projection for FY26 to 6.5% from the earlier estimate of 6.7%, citing external challenges and global developments.

Malhotra emphasised that while investment activity has gained traction, it is expected to improve further due to sustained capacity utilisation. Furthermore, the RBI's policy stance has shifted from "neutral" to "accommodative," providing clear rate guidance, although with no specific guidance on liquidity management at this stage.