RBI keeps repo rate unchanged at 5.5%

The Reserve Bank of India’s Monetary Policy Committee on Wednesday decided to keep the repo rate unchanged at 5.5%.

This came after three consecutive rate cuts since February.

The repo rate is the interest rate at which the central bank lends money to commercial banks. The Monetary Policy Committee reviews the rate every two months.

In June, the committee had cut the repo rate by 50 basis points, lowering it from 6% to 5.5%. The rate was reduced by 25 basis points each in April and February.

A basis point is one-hundredth of a percentage point. Basis points are used to describe the percentage change in the value of a financial instrument.

Central banks usually reduce repo rates to stimulate economic growth by making borrowing cheaper for individuals and businesses. This translates to lower equated monthly instalments for borrowers.

Reserve Bank of India Governor Sanjay Malhotra said on Wednesday that the committee also decided to keep its monetary policy stance as “neutral” despite uncertainties about the United States’ tariffs.

A neutral stance means that the Reserve Bank remained flexible in adjusting policy rates based on prevailing economic conditions. In contrast, a withdrawal of accommodation is a restrictive stance where the central bank aims to reduce the money supply in the economy by increasing interest rates to curb inflationary pressures.

Malhotra further announced that the projections...

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