RBI Repo Rate Cut to 6.25%: First Cut in Nearly Five Years
Why in the news
A 25 bps reduction took the policy repo rate to 6.25%; it is the first easing in almost five years, prompted by softer inflation and weaker growth.
Key facts
- Repo rate: 6.5% to 6.25%; unanimous six-member vote; neutral stance kept.
- Inflation, above 5% recently, is projected at 4.2% for Q4 FY26.
- Growth slid to 5.4% in Q2 FY25; FY25 forecast cut to 6.4% from 6.6%; long-term potential seen at 7%+.
- RBI welcomed slower unsecured retail loan growth; “cease and desist” orders only in the rarest cases.
Regulatory announcements
| Item | Meaning | Change |
|---|---|---|
| LCR | High-quality liquid assets over 30-day net outflows; minimum 100% | Moved to 31 March 2026 |
| ECL | Probability-weighted estimate of default losses | Moved to 31 March 2026 |
Impact
- Around 40% of loans tied to external benchmarks reprice at once; deposit-linked and MCLR loans take two quarters or more.
- Sensex closed 0.3% down at 77,860; Nifty 0.2% lower at 23,560, yet both rose for the week.
- RBI sold dollars to steady the rupee, which settled at ₹87.43 per dollar.
- Market response was muted, suggesting the move was priced in.
Exam angle
- New repo rate: 6.25%; LCR minimum: 100%.