India’s new central bank governor cut interest rates for the first time in almost five years on Friday to help spur a slowing economy as global risks intensify.

The six-member monetary policy committee (MPC) of the Reserve Bank of India (RBI), led by governor Sanjay Malhotra, on Friday reduced the policy repo rate by 25 basis points to 6.25 per cent from 6.5 per cent.

The repo rate cut is expected to lower interest rates on loans, particularly benefiting homebuyers and other borrowers.

The repo rate cut, combined with the benefits from the revised tax slabs announced in the Union Budget 2025 for the new tax regime, is likely to boost loan eligibility and repayment capacity in the up

The move to cut the repo rate comes a week after Budget 2025 proposed making normal income up to Rs 12 lakh tax-free

The repo rate, set by the RBI, influences borrowing costs for banks. A higher repo rate raises FD interest rates, attracting deposits, while a lower rate reduces FD returns by making borrowing cheaper.

The RBI's Monetary Policy Committee cut the repo rate by 25 bps for the first time in nearly five years, maintaining a neutral stance. Governor Sanjay Malhotra noted inflation aligns with targets amid concerns over economic growth and signs of inflation nearing 4 per cent.

The newly-appointed RBI Governor Sanjay Malhotra is anticipated to announce a 25 basis points repo rate cut to 6.25% on February 7. With the slowing economic growth and easing inflation, the Monetary Policy Committee may favor rate reduction to stimulate the economy,