Current Monetary Policy Scenario (as of April 9, 2025):
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) concluded its meeting today, April 9, 2025, and announced the following decisions:
- Repo Rate: Reduced by 25 basis points to 6.00% from 6.25%. This is the second consecutive rate cut, following a 25 bps reduction in February 2025.
- Standing Deposit Facility (SDF) Rate: Adjusted to 5.75% from 6.00%.
- Marginal Standing Facility (MSF) Rate and Bank Rate: Adjusted to 6.25% from 6.50%.
- Policy Stance: Changed from “Neutral” to “Accommodative”. This signals that the central bank is now more inclined towards supporting economic growth and may consider further rate cuts in the future.
- GDP Growth Forecast: Lowered for FY26 to 6.5% from the earlier projection of 6.7%, citing global uncertainties.
- Inflation Projection: Reduced for FY26 to 4.0% from 4.2%, taking into account good agricultural output and falling crude oil prices.
The MPC’s decision to cut the repo rate is aimed at providing a fillip to economic activity amidst concerns about a potential global slowdown due to rising trade tensions and other factors. The change in policy stance to accommodative suggests that the RBI is prepared to take further measures to support growth if necessary, especially with inflation showing signs of easing.
Impact of the Rate Cut:
- Borrowers: The reduction in the repo rate is expected to lead to lower interest rates on loans, including home loans, car loans, and personal loans, providing relief to borrowers in the form of reduced Equated Monthly Instalments (EMIs). Banks have generally started passing on the benefits of the repo rate cuts to their customers, particularly those with loans linked to external benchmarks like the repo rate.
- Economic Growth: Lower borrowing costs can encourage businesses to invest more and consumers to spend more, potentially boosting economic growth.
- Inflation: While the rate cut aims to support growth, the RBI will continue to monitor inflation closely. The accommodative stance indicates a willingness to prioritize growth given the current inflation outlook.
Additional Measures:
In addition to the rate decision, the RBI Governor Sanjay Malhotra announced certain other measures, including a comprehensive review of guidelines on gold loans to harmonize regulations across different regulated entities and measures related to securitization of stressed assets.
Overall, the RBI’s monetary policy continues to evolve in response to domestic and global economic conditions, with a focus on balancing the objectives of price stability and growth.
The recent rate cut and the change in policy stance reflect the current priorities of the Monetary Policy Committee.
