MUMBAI: In a significant move, the Reserve Bank of India on Friday reduced the Repo rate by 25 bps, marking a first such cut after a gap of five years.
RBI cuts repo rate by 25 bps to 6.25% in first policy review under Governor Sanjay Malhotra.
Following are the highlights of the RBI’s bi-monthly monetary policy announced by Governor Sanjay Malhotra on Friday:
- Repo rate (short-term lending rate) reduced by 25 bps to 6.25 pc;
- First rate cut after a gap of 5 years; last reduction was effected in May 2020;
- To continue ‘neutral’ monetary policy stance;
- GDP growth for FY’26 projected at 6.7 pc;
- Inflation to come down to 4.2 pc in FY’26 from 4.8 pc in FY’25;
- Food inflation pressures likely to see significant softening;
- Core inflation expected to rise but remain moderate;
- Banks to have ‘bank.in’ internet domain name, non-banks ‘fin.in’;
- RBI says global economic backdrop remains challenging;
- Indian economy continue to remain strong, resilient;
- CAD expected to remain well within sustainable level;
- As on Jan 31, India’s forex reserves stood at USD 630.6 billion, providing import cover of over 10 months;
Next meeting of Monetary Policy Committee scheduled for April 7-9.Expert reactions
Dhawal Dalal, President & CIO-Fixed Income, Edelweiss MF for post MPC, says: As widely expected, the MPC has cut the Repo Rate by 25 bp to 6.25%. However, there was no forward guidance on policy rates. The stance is maintained at neutral. The RBI Governor has promised liquidity support as and when needed. That probably means the banking system liquidity will be proactively managed in Q4FY25.
