The Reserve Bank of India has cut repo rate by 25 basis points, bringing it down to 6 per cent. This will reduce borrowing costs for banks and enable them to lend money to individual customers at lower rates, reducing EMIs for loans. RBI Governor Sanjay Malhotra said today that the Monetary Policy Committee had voted unanimously to reduce the repo rate.

This is the second time this year that the central bank has cut repo rate. Earlier, it had reduced the key rate to 6.25 per cent in February.

The repo rate, also known as the purchase agreement rate, is the interest rate charged by the RBI from commercial banks on the money it lends to them. So when it is reduced, banks often pass on the benefits to the consumers.

The RBI Governor said the financial year begins on an anxious note for the global economy and the central bank is keeping an eye on inflation risks emerging from global uncertainties. This comes days after the Donald Trump administration in the US imposed reciprocal tariffs on exports from India.

“The dent on global growth due to trade frictions will impede domestic growth. Higher tariffs may have an impact on net exports. India is very proactively engaging with the US administration on trade,” the RBI Governor said. He said it is difficult to quantify now the impact global developments would have on growth. But he said the central bank was not concerned about being able to manage domestic growth.

The prospects for the agriculture sector remain bright and manufacturing activity is showing signs of revival, he said. “Services sector continues to show resilience. Urban consumption is picking up with uptick in discretionary spending,” he said, adding that balance sheets of banks and corporates are “healthy”.

The RBI Governor said that the Monetary Policy Committee had noted that inflation is currently below target and the sharp fall in food prices. 

The GDP growth estimate for this fiscal has been cut by 20 basis points and the real GDP growth is now projected at 6.5 per cent.