MUMBAI: Seeking to build on the feel-good factor generated by the Budget, which announced significant tax cuts, the Reserve Bank of India on Friday cut interest rates by 25 basis points to 6.25%. This is the first repo rate cut in five years and, together with the income tax relief, could give a big boost to consumption-driven growth. The immediate impact of the rate cut is that it will make home, auto, and small business loans cheaper; loans on floating interest rates will automatically come down by 25 bps.The latest cut brings curtains on the second longest high interest rate regime since the rate revision on October 22, 2008 ended a 5.1-year wait for the repo to fall from 8% after the global financial crisis that began in September 2007. Friday’s rate correction comes after five years, as the last cut was in May 2020 when RBI cut rates by an unconventional 50 bps to 4% during the peak of the pandemic.
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