Fri Feb 07 15:58:56 UTC 2025: ## RBI Cuts Repo Rate for First Time in Five Years, Boosting Growth Expectations

**Mumbai, India** – In a landmark decision, the Reserve Bank of India (RBI) today slashed its repo rate by 25 basis points (bps) to 6.25%, marking the first rate cut in five years. The move, announced by new RBI Governor Sanjay Malhotra, aims to stimulate economic growth while acknowledging the need to maintain price stability. The Monetary Policy Committee (MPC) maintained a “neutral” stance, indicating a willingness to adjust policy based on future economic data.

The RBI projects a 6.7% GDP growth for fiscal year 2026 (FY26), with inflation targets set at 4.8% for FY25 and 4.2% for FY26. Governor Malhotra emphasized the need to balance growth with inflation control, citing global uncertainties as a key concern. He highlighted that the projections account for the impact of rupee depreciation and that the central bank will remain vigilant in managing liquidity. The delay in implementing revised liquidity coverage ratio (LCR) norms until March 31, 2026, is expected to ease credit delivery.

The rate cut has been widely welcomed by financial experts. Dhiraj Relli of HDFC Securities described it as a “watershed moment,” particularly beneficial for prospective homeowners due to reduced borrowing costs. Ajit Velonie of Crisil Ratings expects the cut, along with recent tax reliefs, to boost consumption and retail credit, though he cautioned that transmission to bank lending rates may take time. Other analysts, including Rajiv Sabharwal of Tata Capital and Prashant Pimple of Baroda BNP Paribas Mutual Fund, praised the move as well-calibrated and supportive of growth, particularly in the MSME sector.

While acknowledging the positive impact, some analysts, such as Debopam Chaudhuri of Piramal Group, anticipate a delayed transmission of the rate cut into bank lending rates, particularly those linked to the marginal cost of funds-based lending rate (MCLR).

Despite the optimistic outlook, the RBI remains cautious about global uncertainties, which Governor Malhotra identified as a significant threat to growth, investment, and consumption. The central bank’s commitment to providing sufficient liquidity was reiterated, suggesting further measures may be undertaken through open market operations (OMOs) and swaps. The overall sentiment, however, is one of cautious optimism, with many experts anticipating a gradual but sustained improvement in economic activity.

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