RBI MPC Meeting 2025: Governor Malhotra Announces 25 bps Repo Rate Cut to 6.25%

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has decided to adjust the repo rate for the first time in two years, reducing it by 25 basis points—from 6.5% to 6.25%. RBI Governor Sanjay Malhotra made this announcement on Friday, following the MPC meeting held between February 5 and 7, where all members unanimously voted in favor of the rate cut.

Additionally, the standing deposit facility (SDF) rate has been lowered from 6.25% to 6%, while the marginal standing facility (MSF) rate and the bank rate have been revised down to 6.5% from 6.75%, according to the governor.

The MPC has also reaffirmed its 'neutral' policy stance, emphasizing a firm commitment to sustainably aligning inflation with its target while continuing to support economic growth.

Governor Malhotra explained that the decision was based on the MPC’s observation of easing inflation, attributed to a favorable food price outlook and the ongoing impact of previous RBI policy measures.

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"Inflation is expected to moderate further in 2025-26, gradually aligning with the target," Malhotra stated.

For the financial year 2025-26 (FY26), the RBI has projected gross domestic product (GDP) growth at 6.7%. Meanwhile, for FY25, the central bank has maintained its consumer price index (CPI)-based inflation forecast at 4.8%.

This MPC meeting marks the first under Governor Sanjay Malhotra, who took office in mid-December. With a newly restructured six-member MPC, analysts had anticipated a possible shift from the previously hawkish stance of former Governor Shaktikanta Das.

The rate reductions align with Bloomberg's projections, which suggested that the new governor might prioritize economic growth over inflation control.

During its December 2024 meeting, the RBI had opted to keep the repo rate unchanged at 6.5% for the eleventh consecutive time.

Economic Survey 2025 and Inflation

Finance Minister Nirmala Sitharaman recently presented the Economic Survey 2025, which projects India’s GDP growth at 6.3% to 6.8% for FY26, in line with the International Monetary Fund's (IMF) forecast of 6.5%.

The survey attributes the expected moderation in growth to a slowdown in manufacturing activity and reduced government spending in FY25. After an 8.2% expansion in the previous year, GDP growth for FY25 is estimated at 6.4%.

Retail inflation remained above the RBI’s 4% target, with December’s figures recorded at 5.22%.