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 Reserve Bank of India (RBI) reduced its key repo rate on Friday for the first time since May 2020, aiming to provide stimulus to the sluggish economy, which is projected to grow at its slowest pace in four years during the current fiscal year.

The RBI Governor Sanjay Malhotra delivered the first interest rate cut in nearly five years. The RBI MPC reduced the repo rate cut to 6.25% from 6.50%.