The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) on Wednesday ended its three-day meeting and announced its decision to cut the key interest rate by 25 bps, bringing it to 6 per cent from the earlier 6.25 per cent. Moreover, it also changed the policy stance from ‘neutral’ to ‘accommodative’. RBI Governor Sanjay Malhotra made the announcement wherein he said, “After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6.00 per cent with immediate effect.”
The monetary policy committee met from Monday to Wednesday for its first review meeting of the financial year. The MPC holds six bimonthly meetings annually deliberating on key aspects such as interest rates, inflation, money supply, and other macroeconomic indicators. Before this, the MPC had met in February and had announced a 25 bps cut in repo rate, the first reduction since May 2020 and the first revision after two-and-a-half years.
This comes in the backdrop of a challenging global environment that comes amidst trade tariff related measures that have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation. The US imposed a 26 per cent tariff on Indian imports, which is expected to reduce India’s GDP growth for FY26 by 20–40 basis points, potentially lowering it to around 6.1 per cent.
Here are key takeaways from Sanjay Malhotra’s speech:
1. Key interest rate reduced by 25 basis points to 6 per cent from 6.25 per cent, lowering it for the second time in a row. RBI Governor Sanjay Malhotra said, “After a detailed assessment of the evolving macroeconomic and financial conditions and outlook, the MPC voted unanimously to reduce the policy repo rate by 25 basis points to 6.00 per cent with immediate effect.”
2. The RBI MPC changed the monetary stance to accommodative, meaning MPC will, going forward, consider only two options — status quo or a rate cut. Sanjay Malhotra said, “With respect to the policy rate, which is the mandate of the MPC, today’s change in stance from ‘neutral’ to ‘accommodative’ means that going forward, absent any shocks, the MPC is considering only two options – status quo or a rate cut.”
3. The RBI revised its GDP growth estimate for FY26 to 6.5 per cent from 6.7 per cent, with Q1 at 6.5 per cent; Q2 at 6.7 per cent; Q3 at 6.6 per cent; and Q4 at 6.3 per cent. “While the risks are evenly balanced around these baseline projections, uncertainties remain high in the wake of the recent spike in global volatility. It may be noted that the growth projection for the current year has been marked down by 20 basis points relative to our earlier assessment of 6.7 per cent in the February policy,” Sanjay Malhotra said.
4. The RBI projected inflation for FY26 at 4 per cent, lower from earlier estimate of 4.2 per cent, with Q1 at 3.6 per cent; Q2 at 3.9 per cent; Q3 at 3.8 per cent; and Q4 at 4.4 per cent.
5. The standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.75 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 6.25 per cent, the RBI announced.
6. The RBI permitted NPCI to raise the UPI transaction limit for person-to-merchant payments.
7. RBI also proposed to review guidelines for lending against gold jewellery. Sanjay Malhotra said, “Loans against the collateral of gold jewellery and ornaments, commonly known as gold loans, are extended by regulated entities for both consumption and income-generation purposes. In order to harmonise guidelines across various types of regulated entities, to the extent possible, keeping in view their differential risk-bearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct related aspects for such loans.”
8. The central bank proposed to expand scope for co-lending and issue generic regulatory framework. The extant guidelines on co-lending are presently applicable only to arrangements between banks and NBFCs.
9. As on 4th April, 2025, the RBI stated, India’s foreign exchange reserves stood at $676.3 billion, providing an import cover of about 11 months. “Overall, India’s external sector remains resilient as key indicators stay robust,” Sanjay Malhotra said.
10. Liquidity buffer in banking system well above regulatory threshold. Sanjay Malhotra said, “The Reserve Bank is committed to provide sufficient system liquidity. We will continue to monitor the evolving liquidity and financial market conditions and proactively take appropriate measures to ensure adequate liquidity.”