In a key move aimed at boosting domestic demand and shielding the economy from global headwinds, the Reserve Bank of India (RBI) on Wednesday reduced the policy repo rate by 25 basis points, bringing it down to 6 per cent. The rate cut is expected to ease borrowing costs for banks, paving the way for cheaper loans for individuals and businesses alike.

The decision was announced at the end of the three-day meeting of the RBI’s Monetary Policy Committee (MPC), which was chaired by Governor Sanjay Malhotra. The meeting, which began on April 7, concluded with a unanimous vote to cut the rate in light of evolving macroeconomic conditions, especially after the United States, under President Donald Trump, imposed steep 26 per cent tariffs on Indian imports—a move that took effect today.

"After a detailed assessment of the evolving macroeconomic and financial conditions, and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6 per cent with immediate effect," Malhotra said while announcing the monetary policy outcome.

Shift in Policy Stance to Support Growth

Alongside the rate cut, the central bank also shifted its policy stance from ‘neutral’ to ‘accommodative’, signalling a readiness to support the economy further if needed. “It also noted that the rapidly evolving situation requires continuous monitoring and assessment of the economic outlook,” Malhotra noted.

He added that investment activity has started showing signs of recovery and is expected to gain further momentum, backed by sustained capacity utilisation.

GDP Growth and Inflation Projections Revised

In a cautious move, the RBI lowered India’s GDP growth forecast for FY26 from 6.7 per cent to 6.5 per cent, reflecting global uncertainties and the potential impact of the newly imposed US tariffs.

At the same time, there was positive news on the inflation front. The central bank revised its inflation projection downward from 4.2 per cent to 4 per cent, indicating easing price pressures. “We are aiming for non-inflationary growth built on foundation of improved demand and sustained macroeconomic balance,” Malhotra said.

UPI Limit and Co-Lending Expansion

To further strengthen digital transactions, the RBI proposed allowing the National Payments Corporation of India (NPCI) to revise the UPI transaction limit for person-to-merchant payments, aligning it with the evolving needs of the economy.

In a move to promote credit availability, the central bank also expanded the scope of co-lending beyond priority sector loans, encouraging banks and NBFCs to collaborate more widely.

Relief for Borrowers

With the repo rate now at 6 per cent, equated monthly installments (EMIs) on home, auto, and personal loans are expected to fall, offering relief to millions of borrowers.

The RBI’s rate cut comes at a time when the Indian economy faces fresh external shocks due to global trade frictions. The central bank's accommodative stance and policy tools suggest it is prepared to act proactively in maintaining financial stability and supporting growth.