There is good news for India’s economy and the general public. The Reserve Bank of India (RBI) on Friday announced a 0.25 per cent cut in repo rates. After this decision, home loans, car loans and other loans will become cheaper, which will reduce the monthly EMI of people. This decision has been taken after about 5 years and it will directly benefit the middle class and traders.
Repo Rate Cut After 5 Years
The Reserve Bank of India (RBI) had last hiked the repo rate in June 2023, after which it was reduced to 6.5 per cent. After that, nothing changed for a long time. Now RBI has reduced the repo rate from 6.50 per cent to 6.25 per cent. This decision will make all types of loans cheaper and increase liquidity in the market.
What is Repo Rate?
Repo rate is the rate at which the RBI lends short-term funds to commercial banks. When the RBI lowers the repo rate, banks get loans at a lower interest rate and they also start lending to the general public at a lower interest rate.
How will people benefit?
The biggest impact of the repo rate cut will be on home loans, car loans, personal loans and business loans. When banks take money at a low interest rate, they will also give loans to customers at cheaper rates. This will reduce the monthly EMI of people and increase their savings.
Why did the RBI take this decision?
This decision has been taken to strengthen the Indian economy and increase cash flow in the market. 1.The reduction in interest rates will make people take more loans, which will increase the demand in the market. 2. Buyers of houses and vehicles will get direct benefit, which will strengthen the real estate and automobile sector. This step has also been taken to control inflation and maintain the economic growth of the country.
The decision was taken at the Monetary Policy Committee meeting.
The three-day meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India began on February 5, 2025. Its last day was February 7, in which this important decision was taken. After the meeting, RBI Governor Sanjay Malhotra announced a 0.25 per cent cut.
RBI cuts repo rate for first time since Covid
The RBI had cut the repo rate by 0.40 per cent (40 basis points) in May 2020 to support the country’s economy during the Covid-19 pandemic. Since then, there has been only a marginal increase in the repo rate. Now after 5 years, it has been reduced, which will provide great relief to the general public.
This is the first major policy announcement by the new Reserve Bank of India (RBI) Governor Sanjay Malhotra. He was appointed as the 26th Governor of RBI on 11 December 2024. He replaced Shaktikanta Das. Shaktikanta Das led the RBI for 6 consecutive years and resigned from his post on 10 December 2024.
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Opinion of financial experts
Economic experts believe that this reduction will increase investment in the market and various sectors will benefit. However, some experts also say that if inflation rises in the future, the RBI may have to hike interest rates again.
The Reserve Bank of India (RBI) has cut the repo rate by 0.25 per cent. This will make loans cheaper, reduce EMIs and increase economic activity in the market. This decision will not only reduce household expenses, but will also strengthen the country’s economy.
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