RBI MPC cuts repo rate by 25 bps to 6.25%: A look at latest policy rates

RBI MPC: After keeping the benchmark repo rate unchanged at 6.5 per cent for eleven consecutive meetings, the Reserve Bank of India cut rates in its February 2025 meeting

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC), led by newly appointed Governor Sanjay Malhotra, announced a 25-basis-point cut in the repo rate to 6.25 per cent on Friday. Governor Malhotra announced the policy decision, citing inflation was aligning with the target. The MPC unanimously decided to cut rates and maintain the stance.

 

After keeping the benchmark repo rate unchanged at 6.5 per cent for eleven consecutive meetings, India’s central bank cut rates in its February 2025 meeting amid growing concerns about economic growth losing momentum and emerging signs of inflation approaching its 4 per cent target.

 

RBI cut benchmark rates for the first time in nearly five years. It had last reduced the repo rate by 40 basis points to 4 per cent in May 2020.

 

RBI MPC: Key changes

 

Repo rate

The RBI’s Monetary Policy Committee announced a 25-basis-point cut in the repo rate to 6.25 per cent.

 

Standing Deposit Facility

RBI Governor Sanjay Malhotra announced that the Standing Deposit Facility (SDF) rate has been changed to 6 per cent and the marginal standing facility (MSF) rate and the bank rate to 6.5 per cent.

 

CPI forecast

The RBI has maintained its Consumer Price Inflation (CPI) forecast at 4.8 per cent for the 2025 financial year, while projecting inflation at 4.2 per cent for FY26.

 

Q1FY26 at 4.5 per cent

Q2FY26 at 4.0 per cent

Q3FY26 at 3.8 per cent

Q4FY26 at 4.2 per cent

 

GDP forecast

Malhotra further announced that the GDP forecast for the financial year 2025 remains unchanged at 6.6 per cent. The RBI has projected FY26 GDP growth at 6.7 per cent.

 

Q1FY26 at 6.7 per cent

Q2FY26 at 7.0 per cent

Q3FY26 at 6.5 per cent

Q4FY26 at 6.5 per cent

 

RBI’s ‘neutral’ stance

The RBI Governor announced that the Monetary Policy Committee (MPC) has unanimously decided to maintain a ‘neutral’ stance. This approach is intended to keep inflation in line with the target while also fostering economic growth.

Under ‘neutral’ stance, RBI is open to increase or decrease interest rates, depending on data related to inflation and economic growth.

 

Cash Reserve Ratio

RBI Governor Sanjay Malhotra stated that the Cash Reserve Ratio (CRR) will remain unchanged at 4 per cent.