Fri Feb 07 08:26:39 UTC 2025: ## RBI Cuts Repo Rate for First Time in Five Years

**Mumbai, February 2025** – In a move widely anticipated by the market, the Reserve Bank of India (RBI) has cut its benchmark repo rate by 25 basis points (bps) to 6.25 percent. This marks the first rate reduction in nearly five years, with the last cut occurring in May 2020. The decision, announced by RBI Governor Sanjay Malhotra, was unanimous among the Monetary Policy Committee (MPC) members, who also opted to maintain a neutral monetary stance.

The rate cut comes amidst concerns about slowing economic growth and easing inflation. The RBI projected real GDP growth of 6.4 percent for the current fiscal year (FY25), slightly lower than its previous forecast, and 6.7 percent for FY26. While acknowledging global uncertainties posing downward risks, the RBI expressed confidence that inflation will gradually approach its 4 percent target. CPI inflation is projected at 4.8 percent for FY25 and 4.2 percent for FY26.

Governor Malhotra highlighted the resilience of India’s external sector, citing a manageable current account deficit and robust foreign exchange reserves exceeding US$630.6 billion. He also addressed recent liquidity tightening, attributing it to factors like advance tax payments and increased currency in circulation, assuring the market that the RBI is committed to maintaining sufficient system liquidity.

The reduction in the repo rate is expected to stimulate economic activity by making borrowing cheaper for businesses and consumers. However, the continued neutral stance suggests a cautious approach by the RBI, balancing the need for growth with the imperative of maintaining price stability. The SDF rate is now set at 6 percent, while the MSF rate and Bank Rate remain at 6.50 percent.

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