RBI's Unprecedented Rate Cut to Boost Economic Growth

The Reserve Bank of India slashed the repo rate by 50 basis points, setting it at a three-year low of 5.5%. This move aims to stimulate growth amid the slowing economy, marking the third consecutive rate cut since February 2025. Inflation projections have also been adjusted to 3.7%.

The Reserve Bank of India (RBI) made a significant monetary policy adjustment on Friday, cutting the repo rate by a substantial 50 basis points. This measure has brought the key policy rate to a three-year low of 5.5%, offering relief to home, auto, and corporate loan borrowers.

The repo rate previously stood at 5.40% as of August 5, 2022. The reduction is part of a broader strategy by the Monetary Policy Committee (MPC) to tackle sluggish economic growth, with the GDP forecast for the current fiscal year maintained at 6.5%.

In its recent assessment, the MPC deemed that front-loading the rate cuts could enhance economic growth prospects. Alongside rate cuts, the inflation projection has been revised down to 3.7%, driven by optimistic monsoon forecasts. This marks a shift from an accommodative policy stance to a more neutral position.