Money & Banking
Repo Rate Cut and its Implications
The RBI’s Monetary Policy Committee (MPC) reduced the repo rate by 50 basis points (bps),
bringing it down to 5.5%.
This marks the third consecutive rate cut in 2025, totaling a 100 bps reduction since February
What is Repo Rate
Repo rate (Repurchase Agreement Rate) is the interest rate at which commercial banks borrow money from the central bank.
Higher repo rate → Costlier loans for banks → Higher interest rates for consumers &
businesses → Slower borrowing & spending.
Lower repo rate → Cheaper loans for banks → Lower interest rates for borrowers → Increased borrowing & spending.
Monetary Policy Committee (MPC)
The MPC is a statutory body established under the Reserve Bank of India Act, 1934, as amended by the Finance Act, 2016.
It is responsible for setting the benchmark policy rate (repo rate) to control inflation within a
specified target range.
Comprising six members (three RBI officials and three external experts)
