The Reserve Bank of India's Monetary Policy Committee cut the repo rate by 25 basis points to 5.75% in its February 2026 meeting, the second rate cut in the current easing cycle, citing moderation in inflation to below 4.5% and the need to support economic growth amid global uncertainties. The decision was unanimous among all six MPC members, reflecting a clear shift toward growth support after an extended period of policy tightening.
The rate cut is expected to gradually transmit to lower lending rates across the banking system over the subsequent months. The weighted average lending rate on fresh rupee loans had already declined by 18 basis points in January following the first rate cut, and banks are expected to further reduce their marginal cost of funds-based lending rates as the monetary easing cycle deepens. This will benefit home loan borrowers, MSME borrowers and personal loan customers.
The RBI also reduced the cash reserve ratio by 25 basis points to 3.75%, injecting approximately Rs 2 lakh crore of additional liquidity into the banking system. RBI Governor Sanjay Malhotra said the central bank remains focused on achieving the 4% inflation target on a durable basis while supporting growth. The next MPC meeting is scheduled for April 2026, where the stance and rate trajectory will be re-evaluated based on incoming data on inflation, growth and global financial conditions.
