RBI MPC: The Reserve Bank of India (RBI) has announced its sixth and the last bi-monthly monetary policy of Fiscal Year (FY) 2025 today, February 7. RBI in a major decision has reduced the benchmark repo rate by 25 basis points (bps) to 6.25% from 6.5%. This is the first-rate cut in nearly 5 years, with the last reduction done in May 2020. After that, the central bank has raised interest rates seven times, reaching 6.50%. RBI has kept the benchmark rates has remained unchanged since February 2023.
Monetary Policy Statement by Shri Sanjay Malhotra, RBI Governor- February 07, 2025, 10 am https://t.co/mkTluoMAZX
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This meeting of the Monetary Policy Committee (MPC) was headed by the new RBI Governor, Sanjay Malhotra. It was scheduled from February 5 to 7 and the credit policy decision are announced today, February 7. Notably, this was the first MPC meet under the leadership of Malhotra and also the first after the Union Budget 2025-2026 was presented on February 1.
RBI Governor Malhotra unveiled the decision in the monetary policy statement on Friday. The MPC decided to maintain its “neutral” policy stance.
Reports and market experts had earlier predicted that RBI could slash the benchmark repo rate by 25 bps, and the same remains the case in real. This decision may reduce the interest rate on loans for the middle class including the home loans, car loans etc.
RBI MPC: Reason For Repo Rate Reduction?
Economists predict that the Reserve Bank of India (RBI) faced a dilemma in its February policy. The dilemma was balancing tighter liquidity, a weakening rupee, and increased geopolitical uncertainty.
This is a significant shift from the previous policy, which focused on concerns about slower growth and temporary inflation risks that threatened to push inflation above the 4% target.
