Reserve Bank of India building.Reuters/Vivek Prakash

The Reserve Bank of India's Monetary Policy Committee on Thursday, April 4, decided to cut repo rates by 25 basis points or 0.25 per cent to 6 per cent, meeting a majority of economists' expectations.

The RBI's six-member rate-setting panel headed by RBI governor Shaktikanta Das on Tuesday started its three-day monetary policy meet amid expectations of a rate cut to boost the Indian economy. This is the second consecutive rate cut under Shaktikanta Das after a surprise cut in repo rate in February.

"On the basis of an assessment of the current and evolving macroeconomic situation, the Monetary Policy Committee (MPC) at its meeting today decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6 per cent from 6.25 per cent with immediate effect," the RBI said.

"Consequently, the reverse repo rate under the LAF stands adjusted to 5.75 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent."

The MPC also decided to maintain the neutral monetary policy stance.

"These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 percent, while supporting growth."

What is repo rate?

Repo rate is the key interest rate at which the RBI lends short-term funds to commercial banks. Over 85 percent of the nearly 70 economists polled by news agency Reuters had expected the central bank to cut the benchmark lending rate by 25 basis points to 6.00 percent on April 4.