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 decided to stick to its “neutral” stance, acknowledging that the global atmosphere remains uncertain due to evolving new dimensions of global trade policy and repeated weather events.

While the rate cut is intended to ease financial conditions, experts suggest the broader effect on the banking system - particularly on loans linked to the marginal cost of funds-based lending rate (MCLR) and deposits - will not be immediate,