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01 May, 2025
RBI Cuts Repo Rate – April 2025
Wed 09 Apr, 2025
Context : -
- The 54th meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) and the first meeting of the financial year 2025-26 was held from 7 to 9 April 2025 in Mumbai.
- In the meeting, RBI Governor Sanjay Malhotra reduced the repo rate from 6.25% to 6.00% with immediate effect.
- This is the second consecutive repo rate cut during his tenure.
Key Announcements :
| Parameter | April 2025 Policy |
| Repo Rate | 6.00% (↓ 25 bps) |
| Standing Deposit Facility (SDF) | 5.75% |
| Marginal Standing Facility (MSF) | 6.25% |
| Bank Rate | 6.25% |
| Policy Stance | Accommodative |
| GDP Forecast FY26 | 6.5% (↓ from 6.7%) |
| Inflation Projection FY26 | 4% |
Rationale Behind the Decision :
- Shift to "Accommodative" Stance: Signaling potential for further rate cuts unless new shocks emerge.
- Growth Concerns: Global trade disruptions, especially a 26% tariff imposed by the US on Indian exports, have posed downside risks to GDP.
- Inflation Management: Retail inflation is expected to remain well within the target band (4%), owing to a fall in food prices.
GDP & Inflation Outlook (FY26):
| Quarter | GDP Growth Forecast | Inflation Forecast |
| Q1 | 6.5% | 3.6% |
| Q2 | 6.7% | 3.9% |
| Q3 | 6.6% | 3.8% |
| Q4 | 6.3% | 4.4% |
Global Context & Impact
- Global volatility and geopolitical tensions, including protectionist trade policies, continue to weigh on the Indian economy.
- Bond Market Reaction: 10-year bond yield dropped slightly to 6.50%.
- Rupee Movement: Slight depreciation post-policy (₹86.61/$).
- Stock Market: Sensex and Nifty fell by 0.5% and 0.7% respectively.
- Static Facts: Reserve Bank of India (RBI)
| Feature | Details |
| Established | 1 April 1935 (as per RBI Act, 1934) |
| Nationalized | 1 January 1949 |
| Headquarters | Mumbai |
| Current Governor | Sanjay Malhotra |
| First Governor (Indian) | C.D. Deshmukh |
| Functions | Monetary policy, currency issuance, banking regulation, forex management |
| Repo Rate Tool | Introduced in 2000 |
| Inflation Targeting | 4% ±2% (as per FRBM Act, 2016) |
| Monetary Policy Committee | 6 members (3 from RBI, 3 nominated by GoI) |
About Monetary Policy Committee (MPC) :
| Feature | Description |
| Setup | 2016, via amendment to RBI Act |
| Composition | 6 members (3 RBI + 3 Central Government nominees) |
| Chairperson | RBI Governor (currently Sanjay Malhotra) |
| Mandate | Maintain inflation target while supporting growth |
| Meetings | At least 4 times a year |
| Voting | Each member has one vote; Governor has casting vote in case of tie |
RBI Monetary Policy Stances :
| Stance | Meaning |
| Accommodative | RBI likely to reduce interest rates to support growth |
| Neutral | RBI may either increase or reduce rates depending on macro indicators |
| Hawkish | RBI focuses on controlling inflation, may hike interest rates |
| Dovish | RBI prioritizes growth, leans towards rate cuts |