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 repo rate is the interest rate at which the RBI lends money to banks. When the central bank lowers this rate, banks can borrow funds at a lower cost. However, it also leads to a drop in deposit rates,

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.