RBI Monetary Policy: After 5 years repo rate cut by 0.25 % to 6.5%

The Reserve Bank of India (RBI) Governor Sanjay Malhotra announced a cut in the policy repo rate under the liquidity adjustment facility (LAF) by 0.25 % and reduced it to 6,25 %.The cut was announced by the RBI Governor as per the recommendation of the Monetary Policy Committee of the RBI. 

After five years, the RBI has cut the policy repo rate.

The recently appointed RBI Governor Sanjay Malhotra announced his first bimonthly monetary policy on 7th February 2025.

The RBI has also forecasted a growth rate of 6.7 % for the Indian economy in 2025-26.

According to the National Statistical Office, the growth rate of the gross domestic product (GDP) of India in 2024-25 was 6.4%.  

The meeting of the Monetary Policy Committee of the RBI was held on 5-7 February 2025 in Mumbai and was chaired by the RBI Governor Sanjay Malhotra.

The next meeting of the MPC is scheduled for April 7 to 9, 2025.

Policy Rates and Ratios 

With the reduction in the policy repo rate by 0.25% there has been an automatic reduction in the standing deposit facility (SDF) rate,the marginal standing facility (MSF) rate and the Bank Rate by 0.25 %. There have been no changes in the reserve ratios.

Current rate and ratios are as follows.

GDP growth forecast for 2025-26  

RBI has forecasted a growth rate of 6.7 % in 2025-26.

RBI has forecasted a quarterly growth rate for the financial year 2025-26 as follows.

• Q1 (April to June 2025) at 6.7  percent;
• Q2 (July to September 2025) at 7.0 percent; 
• Q3 (October  -December 2025 ) at 6.5  percent; and
• Q4 (January-March 2026) at 6.5 percent.

Policy Initiatives Announced by the RBI Governor 

The RBI governor also announced a few policy initiatives which are as follows.

Introduction of forward contracts in Government securities

• RBI will soon introduce forward contracts in government securities.

Access of SEBI-registered non-bank brokers to NDS-OM

• RBI will soon allow  brokers registered with the Securities Exchange Board of India (SEBI) to participate in the Negotiated Dealing System – Order Matching (NDS-OM).
• The NDS-OM is an electronic trading platform for secondary market transactions in government securities regulated by RBI. 
• At present only entities regulated by the RBI, and the clients of banks and standalone primary primary dealers can participate in the NDS-OM.

Introduction of 'bank.in' domain for Indian Banks to enhance cyber security

• To enhance cyber security the RBI will introduce an exclusive 'bank.in’ domain for the Indian banks.
• This is expected to improve cyber security and reduce cyber threats like phishing etc.

Monetary Policy Committee (MPC)

The Monetary Policy Committee was established by the government of India on 29 September 2016 under the provisions of the Reserve Bank of India Act 1934.

• MPC sets the policy interest rate of the RBI to achieve the inflation target set by the government of India. 
• As per the RBI Act, the MPC has to meet at least four times a year.

Members - Sanjay Malhotra, RBI Governor who is also the chairman of the MPC.

Other members are  Dr. Nagesh Kumar,Prof. Ram Singh, Saugata Bhattacharya, Dr. Rajiv Ranjan, and M. Rajeshwar Rao.