The Reserve Bank of India (RBI) has delivered another dose of good news to borrowers. After already announcing three interest rate cuts earlier this year, the central bank has once again lowered key lending rates. In the latest monetary policy review, RBI Governor Sanjay Malhotra announced a reduction of 25 basis points, bringing the repo rate down to 5.25%.
Malhotra explained that despite the recent fall in the value of the rupee, inflation has dropped to its lowest level in months, while the country’s economic growth has remained strong. These factors encouraged the Monetary Policy Committee (MPC) to approve another rate cut aimed at boosting economic activity.
Relief for Loan Borrowers
The fresh cut in interest rates is expected to bring additional relief to home loan and vehicle loan customers, as banks may soon revise their lending rates. Earlier this year, the RBI reduced key rates in February and April by 25 basis points each, followed by a larger 50 basis point cut in June. With the latest announcement, the repo rate has now fallen by a total of 1.25% in 2024.
Key Highlights from the RBI Governor’s Address
RBI Governor Sanjay Malhotra outlined several important developments related to India’s economic performance and future outlook:
• Strong GDP Growth
The governor noted that economic growth remained robust. Due to increased consumer spending—supported mainly by GST simplification—India recorded 8.2% GDP growth in the second quarter of the current financial year. In view of this positive momentum, the RBI revised its GDP growth forecast for FY 2025–26 from 6.8% to 7.3%.
• Inflation Drops Further
Inflation has also been easing steadily. Considering the declining trend, the RBI lowered its inflation projection for the current financial year from 2.6% to 2%, offering reassurance that price pressures remain under control.
• Open Market Operations
The RBI also announced plans to conduct Open Market Operations (OMO) to sell government securities worth ₹1 lakh crore. This move aims to regulate liquidity in the financial system.
• Strong Forex Reserves
India’s foreign exchange reserves remain stable at $686 billion, the governor said. These reserves are sufficient to support up to 11 months of imports, providing a strong buffer against global uncertainties.
