RBI slashes repo rate to 5.5% for third time, brings relief to borrowers

In a major relief to millions of loan-burdened citizens amid rising prices, the Reserve Bank of India (RBI) has once again reduced the repo rate , the third such cut under Governor Sanjay Malhotra. As expected, the Monetary Policy Committee (MPC) has slashed the repo rate by 50 basis points, bringing it down to 5.5%.

Also Read:Banking error leads to life-changing bond and educational sponsorship in Bengaluru

This strategic move is aimed at easing financial stress for common citizens by making loans more affordable. With this reduction, interest rates on home, vehicle, and personal loans are expected to drop by around 1%, providing substantial relief to borrowers.

Governor Sanjay Malhotra, since assuming office, has overseen a total repo rate cut of 100 basis points, signaling a pro-consumer monetary stance. The central bank emphasized its commitment to ensuring that the benefits of this rate cut reach the public, and both RBI and the Central Government are expected to closely monitor banks’ lending rates.

The decision came during RBI's bi-monthly policy meeting, where controlling inflation and promoting liquidity in the economy were key discussion points. Lower repo rates reduce the cost at which commercial banks borrow from RBI, enabling them to lend more affordably to consumers. This move is expected to stimulate spending and investment, especially at a time when inflation continues to affect household budgets.

What is the Repo Rate?
The repo rate is the interest rate at which the RBI lends funds to commercial banks against government securities. It plays a pivotal role in controlling inflation, regulating liquidity, and influencing the overall economic activity of the country.