The Reserve Bank of India (RBI) Governor Sanjay Malhotra announced to lower the repo rate by 25 basis points to 6.25% on Friday, February 7, 2025.
The RBI commenced its three-day meeting on Wednesday, February 5
The Reserve Bank of India (RBI) Governor Sanjay Malhotra announced to lower the repo rate by 25 basis points to 6.25% on Friday, February 7, 2025.
Governor Malhotra said that the Monetary Policy Committee (MPC) has once again unanimously decided to maintain a neutral stance, prioritising a sustained alignment of inflation with the target while continuing to support economic growth.
“The MPC observed that inflation has eased, aided by a favourable outlook on food prices and the ongoing impact of previous monetary policy measures. This trend is expected to continue, with inflation gradually aligning with the target in 2025-26,” Malhotra said.
“Headline inflation, after moving above the upper tolerance band in October has since registered a sequential moderation in November and December, standing at 5.2% now going ahead. CPI inflation for the current financial year is projected at 4.8% with Q4 current quarter at 4.4%. Assuming a normal monsoon, CPI inflation for the financial year 2025-26 is projected at 4.2%, with Q1 at 4.5%, Q2 at 4%, Q3 at 3.8% and Q4 at 4.2%. The risks are evenly balanced,” the Governor said .
The central bank commenced its three-day meeting on Wednesday, February 5. In the previous MPC meeting in December 2024, the RBI had maintained the status quo keeping the key interest rate at 6.5%.
Additionally, the Governor announced a 50 bps reduction in the Cash Reserve Ratio (CRR) to 4%, aimed at enhancing liquidity and supporting credit growth.
Malhotra announced that the RBI MPC projects India’s FY26 GDP growth at 6.7%. In the previous meeting in December, the then RBI Governor Shaktikanta Das had pegged India’s growth for this fiscal year at 6.6%.
The central bank expects economic growth in Q1, Q2, Q3 and Q4 of the next fiscal year starting April 1 at 6.7%, 7%, 6.5% and 6.5%, respectively.
The last rate cut was in May 2020 of 40 bps to revive the economic growth affected by the Covid-19 pandemic.
The raise in the tax rebate to Rs 12 lakhs in the Union Budget, aimed at boosting the disposable income of the middle class, along with the RBI’s recent liquidity measures through OMO and VRR auctions, demonstrate India's commitment to improving liquidity, stimulating sluggish demand, and driving economic growth.