Fri Feb 07 06:45:50 UTC 2025: ## RBI Cuts Repo Rate by 0.25%, Signaling Easing Monetary Policy

**Mumbai, February 7, 2025** – The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) today announced a 0.25% reduction in the repo rate, bringing it down to 6.25%. This marks the first repo rate cut in five years, ending an eleven-meeting streak of unchanged rates. The decision was unanimous, according to RBI Governor Sanjay Malhotra, who addressed the media following the MPC meeting.

The rate cut is expected to lead to lower EMIs on various loans, including home and auto loans. Immediately following the announcement, SBI announced reductions in its home and auto loan interest rates.

Governor Malhotra highlighted a robust Indian economy, while acknowledging ongoing global challenges. He expressed confidence that food inflation would ease with the arrival of the new harvest. He also announced the upcoming launch of a dedicated platform to combat rising cyber fraud, with registration opening in April. Further initiatives include a working group to review trading and settlement timings in regulated markets and a proposal to incorporate long-term contracts in government securities.

The RBI projects retail inflation at 4.8% for FY25 and 4.2% for FY26. GDP growth for FY26 is forecast at 6.7%. Malhotra urged banks to optimize their cash reserves with the RBI, promoting inter-bank lending instead of unnecessary holdings at the central bank. He also reiterated that the RBI’s foreign exchange policy remains focused on orderly and stable market operations, not targeting specific exchange rates.

The MPC maintained a ‘neutral’ stance on monetary policy despite the rate cut. Other key changes include setting the MSF rate at 6.5%, SDF rate at 6%, and reverse repo rate at 3.35%. The CRR remains at 4.5%.

The repo rate cut was widely anticipated by several experts and research firms, including Goldman Sachs and the Bank of America Global Research, who cited the need to support economic growth while managing inflation. However, some analysts, such as Yes Securities, had predicted no change in the repo rate due to global uncertainties and the rupee’s recent weakness. While the rupee did experience some recent volatility, it strengthened slightly following the announcement. The stock market opened higher in anticipation of the decision.

Read More