Fri Feb 07 10:30:49 UTC 2025: ## RBI Cuts Repo Rate for First Time in Five Years, Boosting Growth Expectations

**Mumbai, February 7, 2025** – The Reserve Bank of India (RBI) Monetary Policy Committee (MPC) today announced a 25 basis points (bps) cut in the repo rate, bringing it down to 6.25%. This marks the first rate reduction in nearly five years, signaling a shift towards a more growth-oriented policy stance. The decision was unanimous.

The MPC cited easing inflation and slowing growth as the primary reasons for the rate cut. Headline inflation, while still above the RBI’s target of 4%, has shown signs of moderation in recent months, primarily due to falling food prices. GDP growth for the current fiscal year (FY24-25) is now estimated at 6.4%, lower than previous projections, while FY25-26 growth is projected at 6.7%, driven by anticipated increases in consumption and investment. The MPC projects inflation to fall to 4.2% in FY25-26.

Despite the rate cut, the MPC maintained a “neutral” stance, emphasizing its data-dependent approach and flexibility in responding to evolving domestic and global economic conditions. The Standing Deposit Facility (SDF) rate was reduced to 6.00%, while the Marginal Standing Facility (MSF) rate and Bank Rate remain at 6.50%.

Experts largely welcomed the decision, viewing it as a necessary step to stimulate economic growth and support businesses, particularly in the struggling industrial sector. While some analysts expressed disappointment at the lack of additional liquidity measures beyond those already implemented, others suggested that the RBI is strategically conserving tools to address potential future challenges arising from global economic uncertainty. Several economists predict further rate cuts in the coming months, with estimates ranging from 25 to 100 bps over the next fiscal year. The impact on the Rupee, which recently hit a record low against the US dollar, remains a key concern, although the RBI stated that it does not target any specific exchange rate.

The rate cut is expected to have a significant positive impact on various sectors, including real estate, where it is anticipated to boost homebuyer sentiment and investment. The RBI also announced plans to introduce forward contracts in government securities to enhance market efficiency and risk management capabilities. Further, the RBI is taking steps to enhance cybersecurity in the banking sector, including the introduction of the “.bank.in” domain for financial institutions.

The next MPC meeting is scheduled for April 7-9, 2025. The minutes of this meeting will be released on February 21, 2025.

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