In May 2020, the RBI made its most recent reduction to the repo rate, decreasing it by 40 basis points to a rate of 4%.
The Reserve Bank on February 7 cut the repo rate, at which it lends to the commercial banks, by 0.25 percentage point to bring down the key benchmark rate to 6.25%. This reduction means banks’ borrowing costs will come down, which will ultimately result in lower rates on loans, including home and other personal loans.
RBI Governor Sanjay Malhotra, in his maiden monetary policy review of the central bank, announced that after a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook, the rate-setting panel of the central bank unanimously decided to cut the repo rate, paving the way for banks to replicate the rate cut for loan borrowers by a similar margin if not more.
Reserve Bank of India (RBI) Governor Sanjay Malhotra. | Photo Credit: REUTERS
