As Trump Tariffs Take Effect, RBI Lower Repo Rate to 6%

The repo rate was lowered by 25 basis points to 6% by the Reserve Bank of India. As a result, banks will have cheaper borrowing costs and be able to offer loans to individual consumers at reduced interest rates, which will lower loan instalment payments. The Monetary Policy Committee (MPC) unanimously decided to lower the repo rate, RBI Governor Sanjay Malhotra announced on 9 April. This is the second time the central bank has lowered the repo rate this year. The interest rate that the RBI charges commercial banks on the funds it lends them is called the repo rate or purchase agreement rate. Therefore, banks frequently pass the savings on to customers when it is decreased.

The MPC reduced the repo rate from 6.5% to 6.25% during its most recent meeting in February 2025, which was the first rate drop since 2020. In an effort to increase credit flow and improve banking sector liquidity, the central bank recently lowered the Cash Reserve Ratio (CRR) by 50 basis points to 4%. In February, the MPC stuck to its neutral posture, which it had initially taken in October 2024. Because of its adaptability, the RBI can react to changing market conditions without being constrained by predetermined policy trajectories.

Commenting on the development, Rohit Garg, CEO and Co-Founder, Olyv stated, "The RBI’s 25 bps repo rate cut is a clear signal to support growth while maintaining vigilance on inflation. For India’s credit-starved MSMEs and middle-class borrowers, even a marginal reduction in borrowing costs can unlock meaningful financial relief. However, the real test lies in the speed and efficiency with which the financial system transmits this benefit to end consumers. Monetary policy can be a powerful enabler, but its real impact will depend on coordinated execution, structural reforms, and the agility of our financial institutions. The MPC’s stance reflects cautious optimism—acknowledging easing inflation trends while staying alert to global uncertainties such as volatile commodity prices, geopolitical tensions, and shifts in global monetary policy."

Trump’s Reciprocal Tariff Hampers the Global Economic Growth

According to the RBI Governor, the global economy is experiencing anxiety as the fiscal year gets underway. He further stated that the central bank is monitoring inflation risks that arise from these uncertainties. This occurs just a few days after the US administration of Donald Trump placed reciprocal tariffs on Indian products. The governor of RBI stated that the impact of trade frictions on global development will hinder domestic growth. Net exports may be impacted by higher tariffs. India is aggressively negotiating trade with the US government. He claimed that it is now hard to predict how global changes will affect growth. However, he claimed that the central bank had no worries about controlling domestic development.

RBI Governor Elaborating on Overall Pulse of Indian Market

According to the Governor manufacturing activity is reviving, and the agricultural sector's prospects are still promising. The services industry is still resilient, he continued. With an increase in discretionary spending, urban consumption is increasing. He reported that bank and business balance sheets are "healthy" in the banking sector. The RBI Governor stated that the Monetary Policy Committee had taken note of the rapid decline in food prices and the fact that inflation is currently below goal. Real GDP growth is now expected to be 6.5%, a 20 basis point reduction from the GDP growth estimate for this fiscal year.