The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) announced a rate cut by 25 basis points to 6.25% on Friday under the leadership of newly appointed Governor Sanjay Malhotra.
After assessing the current and evolving macroeconomic situation, the MPC unanimously decided to reduce the policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points to 6.25 per cent with immediate effect," said RBI governor Sanjay Malhotra.
The rate cut announced by the committee is the first since 2020. This was also the first policy meeting of Sanjay Malhotra as RBI Governor.
"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 spurring economic growth," said Boman Irani, President, CREDAI National.
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.
"On the domestic front, as per the First Advance Estimates (FAE), real gross domestic product (GDP) is estimated to grow at 6.4 per cent (y-o-y) in 2024-25 supported by a recovery in private consumption," said Malhotra.
The next meeting of the MPC is scheduled from April 7 to 9, 2025.
