Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday announced that the central bank has slashed the policy repo rate by 25 basis points from 6.5 per cent to 6.25 per cent. The decision was taken on a unanimous basis.
The MPC committee decided to maintain a neutral stance. The SDF rate shall be at 6 per cent and the bank rate shall be pegged at 6.5 per cent, he added.
The governor said in his address that flexible inflation targeting framework has served India well, while adding the interest of the economy demands financial stability.
Commenting on the RBI’s decision to reduce repo rate by 25 bps, CREDAI National President Boman Irani said: “The RBI’s decision to reduce the repo rate by 25 basis points to 6.25% supplements recent announcements in the budget aimed at boosting spending and spur economic growth. This supportive monetary policy was imperative, especially after the recent 50-basis-point reduction in the Cash Reserve Ratio (CRR), which has already injected significant liquidity into the banking system. As inflations continues to remain a notch higher than the medium-term target of 4%, the central bank has its task cut out – Contain inflation, inject liquidity into banking system and cut repo rates in the coming quarter too. While the current cut may have a limited direct impact, we anticipate that a further rate cut in the next MPC meeting will provide stronger impetus to overall demand, accelerating housing sales, particularly in the mid-income and affordable segments. Together, these measures signal a robust framework for sustainable growth, fostering confidence among homebuyers, developers, and investors alike.”
During its December 2024 meeting, the RBI kept repo rate unchanged at 6.5 per cent for the 11th consecutive time due to challenges arising from inflation. The rate increase cycle was put on a pause in April last year after 6 consecutive hikes in repo rate aggregating to 250 bps since May 2022.
This was the first RBI monetary policy committee meeting with Sanjay Malhotra as the central bank governor. The RBI MPC met from February 5-7, 2025.