RBI cuts repo rate to 6% as Trump tariffs kick in

The Reserve Bank of India (RBI) has lowered the repo rate by 25 basis points, bringing it down to 6 per cent. This move is expected to reduce borrowing costs for banks, allowing them to offer loans to customers at lower interest rates, which means reduced EMIs for borrowers. RBI Governor Sanjay Malhotra announced that the Monetary Policy Committee unanimously agreed to cut the repo rate.

This is the second repo rate cut by the central bank this year. In February, the rate was reduced to 6.25 per cent.

The repo rate, also known as the repurchase rate, is the interest the RBI charges commercial banks when lending money to them. A cut in this rate typically leads to banks passing on the benefit to customers.

Governor Malhotra noted that the new financial year has begun amid global economic uncertainty, and the RBI is closely monitoring inflation risks stemming from international issues. This statement comes shortly after the US, under President Donald Trump’s administration, imposed retaliatory tariffs on Indian exports.

“The dent on global growth due to trade frictions will impede domestic growth. Higher tariffs may have an impact on net exports. India is very proactively engaging with the US administration on trade,” the Governor said. He added that while it’s difficult to estimate the exact impact of these global events on India’s economy, the central bank is confident in its ability to support domestic growth.

He also said the outlook for the agriculture sector remains positive, and manufacturing is starting to recover. “The services sector continues to show resilience. Urban consumption is picking up with uptick in discretionary spending,” he said, adding that the financial health of banks and corporates is “healthy”.

The Governor further stated that the Monetary Policy Committee took note of inflation being below target, largely due to a sharp drop in food prices.