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The Reserve Bank of India (RBI) has announced a significant reduction in its key repo rate, lowering it by 25 basis points from 6.5% to 6.25%. This decision marks the first rate cut in nearly five years, according to RBI Governor Sanjay Malhotra, who explained that the Monetary Policy Committee reached a unanimous decision during its latest meeting.
The last rate adjustment occurred in May 2020, and the rate had remained unchanged during the last 11 policy meetings. Governor Malhotra noted the challenging global economic environment, characterized by growth below historical averages, but recognized that India’s economic resilience persists. He projected a real GDP growth rate of 6.4% for the current financial year, with expectations for slightly higher growth in subsequent quarters.
Malhotra also highlighted concerns regarding an increase in digital fraud and emphasized the need for enhanced preventive measures by banks. He cited adequate liquidity buffers within the banking system while asserting that steps would be taken to maintain orderly liquidity conditions.