Fri Feb 07 11:45:49 UTC 2025: ## RBI Cuts Repo Rate for First Time in Five Years, Boosting Economic Growth

**Mumbai, February 2025** – The Reserve Bank of India (RBI) has announced a 25 basis point cut to its repo rate, bringing it down to 6.25 percent. This marks the first rate reduction in five years, aimed at stimulating economic activity and countering a recent slowdown. The unanimous decision by the Monetary Policy Committee (MPC) follows a government initiative to cut personal income tax.

RBI Governor Sanjay Malhotra stated that the rate cut, making borrowing cheaper, should encourage increased spending and investment. While implementing the cut, the MPC maintained a “neutral” stance, offering flexibility to adapt to evolving economic conditions. Malhotra highlighted the success of the current inflation-targeting framework, noting that CPI inflation has largely remained aligned with the target since its introduction. He also outlined plans to further refine the framework using new data and improved forecasting models.

Despite global uncertainty, including the threat of US tariffs impacting global trade, the RBI projects GDP growth at 6.7 percent for the next fiscal year (2025-26). This is slightly higher than the government’s projection of 6.3-6.8 percent. The current fiscal year (2024-25) is expected to see slower growth at 6.4 percent, the lowest in four years.

Retail inflation is projected at 4.2 percent for 2025-26, down from 4.8 percent in 2024-25. The MPC cited declining inflation, supported by favorable food prices and past monetary policy actions, as justification for the rate cut.

The repo rate cut is expected to lower borrowing costs for consumers and businesses, reducing EMIs on loans linked to external benchmark lending rates (EBLR). The RBI is also working to ensure full transmission of the rate cut to loans linked to the marginal cost of fund-based lending rate (MCLR).

Addressing concerns about cyber fraud in the rapidly digitalizing financial sector, Malhotra announced new measures, including enhanced authentication for online international payments and the implementation of “.bank.in” and “.fin.in” domain names for increased security.

While acknowledging global economic headwinds, including the strengthening dollar and capital outflows from emerging markets, Malhotra stressed the resilience of the Indian economy. He also emphasized the RBI’s continued commitment to maintaining exchange rate stability and a consultative approach to regulatory implementation. The RBI Governor noted risks to growth and inflation stemming from global financial market volatility and potential adverse weather events. Finally, the article mentions an ongoing Enforcement Directorate investigation into illegal immigration to the US by 4,200 Indians.

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