Bringing massive relief to home and auto loan borrowers, the Reserve Bank of India (RBI) announced reduction in interest rate for the second time on Wednesday..

This is new RBI Governor Sanjay Malhotra’s second Monetary Policy after he took charge at the central bank, succeeding Shaktikanta Das. The six-member Monetary Policy Committee (MPC) meeting that began on Monday, announce the decision to reduce the repo rates by 25 basis points to 6 percent.

The Monetary Policy Committee has unanimously decided to slash the policy rate by 25 basis points to 6.25 per cent, RBI Governor Sanjay Malhotra said.

The central bank has lowered the GDP growth forecast to 6.5 per cent from earlier projection of 6.7 per cent due to global uncertainties. RBI’s latest Monetary Policy comes fresh on the heels of US President Donald Trump’s hefty 26 percent reciprocal tariffs on Indian imports, effective today (April 9).

RBI Governor Sanjay Malhotra said, “First and foremost, uncertainty in itself dampens growth by affecting investment and spending decisions both of businesses and households. Second, the dent on global growth due to trade frictions will also impede domestic growth. Third, higher tariffs shall have a negative impact on net exports. The impact of relative tariffs, our relative tariffs vis some of the other countries are quite low. Then there is the unknown of the elasticities of our export and import demand and the policy measures adopted by us. India is very vigorously and proactively engaging with the US administration on the foreign trade agreement”.

In his first Monetary Policy in February, Governor Malhotra had reduced the key interest rates after a gap of nearly five years from 6.5 percent to 6.25 percent.

RBI had last reduced the repo rate by 40 basis points to 4 per cent in May 2020, following the outbreak of the Covid pandemic and subsequent lockdown.

Two years later, in May 2022 RBI started a rate hike cycle in view of the Russia-Ukraine war only to hit pause button on interest rates in May 2023.