RBI Cuts Repo Rate for the First Time in Five Years to Spur Economic Growth

Governor Sanjay Malhotra announces a 25 bps rate cut to 6.25%, focusing on boosting resilience amidst global economic challenges.

February 7, 2025: RBI Reduces Repo Rate After Nearly Five Years to Stimulate Economy

In a significant move, the Reserve Bank of India (RBI) has cut its key repo rate by 25 basis points (bps), bringing it down from 6.5% to 6.25%. This is the first rate reduction in nearly five years, aimed at boosting economic growth. The decision was announced by RBI Governor Sanjay Malhotra during his inaugural policy address since assuming office in December.

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The Monetary Policy Committee (MPC), consisting of three RBI members and three external members, reached a unanimous decision to lower the rate. The last reduction occurred in May 2020, and the rate had remained unchanged through the last 11 policy meetings.

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Economic Outlook:

Governor Malhotra highlighted the resilience of the global economy despite challenging conditions and noted that while India remains strong, it is not immune to global headwinds. He projected the real GDP growth for the current financial year at 6.4%, with an expected growth of 6.7% in the first quarter of the next financial year.

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Inflation and Liquidity:

Retail inflation for the ongoing financial year is estimated at 4.8%, with a forecast of 4.4% in the last quarter. Although core inflation is expected to rise, food inflation is predicted to soften. Governor Malhotra assured that bank liquidity remains robust and emphasized the RBI’s proactive approach to maintaining liquidity conditions.

Concerns Over Cyber Fraud:

Addressing a surge in digital fraud, the Governor called for a collective effort from stakeholders to improve preventive and detection mechanisms. He urged banks to strengthen their cybersecurity infrastructure to tackle the rising threat.

This policy shift is expected to provide much-needed momentum to India’s economy while ensuring stability amidst global uncertainties.

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RBI repo rate, Indian economy, Sanjay Malhotra, Monetary Policy Committee, economic growth, inflation forecast, global economy, cyber fraud prevention, banking sector, rate cut analysis