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)
