RBI MPC Meeting 2025 HIGHLIGHTS: RBI cuts repo rate by 25bps, shifts to accommodative stance

RBI Governor Sanjay Malhotra will hold a press conference at 12:00 noon. During this, he will answer questions around the key interest rate, inflation trajectory and growth outlook. Stay tuned.

The RBI MPC is scheduled to meet again in June. “The next meeting of the MPC is scheduled from June 4 to 6, 2025,” the central bank said in a statement. The minutes of the MPC’s April meeting, it added, will be published on April 23, 2025.

To conclude, RBI Governor Sanjay Malhotra said, “In our context, as I mentioned earlier, the domestic growth-inflation trajectory demands monetary policy to be growth supportive, while being watchful on the inflation front. We are aiming for a non-inflationary growth that is built on the foundations of an improved demand and supply response and sustained macroeconomic balance. As before, we shall remain agile and decisive in our response and put in place policies that are clear, consistent, credible and in the best interest of the economy.”

RBI Governor Sanjay Malhotra said, “The global economy is going through a period of exceptional uncertainties. The difficulty to extract signal from a noisy and uncertain environment poses challenges for policy making. Nevertheless, monetary policy can play a vital anchoring role in ensuring that the economy remains on an even keel.”

Sanjay Malhotra said, “The other two announcements relate to enabling NPCI to decide, in consultation with the banks and other stakeholders, the transaction limits in UPI for person to merchant transactions; and making the Regulatory Sandbox theme-neutral and ‘on-tap’. Necessary directions for the implementation of these two measures shall be issued separately.”

Sanjay Malhotra said, “To harmonise the regulations governing non-fund-based facilities across regulated entities, we propose to issue comprehensive guidelines. Instructions related to partial credit enhancement (PCE) by regulated entities are also proposed to be revised. This is expected to broaden the funding sources for infrastructure financing.”

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 riskbearing capabilities, we shall issue comprehensive regulations on prudential norms and conduct related aspects for such loans.”

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Sanjay Malhotra said, “The extant guidelines on co-lending are presently applicable only to arrangements between banks and NBFCs. Moreover, they are restricted to priority sector loans. To exploit the huge potential of such lending arrangements, it is proposed to extend them to all regulated entities and to all loans – priority sector or otherwise.”

The RBI governor announced six additional measures related to banking regulation, fintech and payment systems. He said, “It is proposed to enable securitisation of stressed assets through market based mechanisms. This is in addition to the existing ARC route under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.”

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.”

RBI Governor Sanjay Malhotra said, “System liquidity was in deficit in January 2025 with net injection under the liquidity adjustment facility (LAF) scaling a peak of Rs 3.1 lakh crore on 23rd January 2025. However, as a result of a slew of measures injecting liquidity of about Rs 6.9 lakh crore, the system liquidity deficit tapered during February-March 2025 and further turned into surplus on 29th March 2025. Coupled with government spending picking up pace during the latter half of March, system liquidity further improved and it stood at a surplus of Rs 1.5 lakh crore as on 7th April, 2025.”

As on 4th April, 2025, 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, the RBI governor said.

RBI Governor Sanjay Malhotra said, “On the financing side, gross foreign direct investment (FDI) remained strong during the period of April 24 to January 25 in 2024-25 reflecting India’s strong macroeconomic fundamentals. Net FDI however moderated sharply during this period due to higher repatriations and outward FDI. Net FPI inflows to India stood at 1.7 billion US dollars during 2024-25, supported by debt inflows as the equity segment recorded net outflows. External commercial borrowings and nonresident deposits, on the other hand, witnessed higher net inflows compared to that last year.”

RBI Governor Sanjay Malhotra said, “India’s services exports remained resilient in January-February 2025, driven by software, business and transportation services. Going forward, net services and remittance receipts are expected to remain in large surplus, partly offsetting the trade deficit. The CAD for 2024-25 and 2025-26 are expected to remain well within the sustainable level.”

On the demand side, Sanjay Malhotra said, “Bright prospects of the agriculture sector bode well for rural demand which continues to be healthy, while urban consumption is gradually picking up with an uptick in discretionary spending. Investment activity has gained traction and it is expected to improve further on the back of sustained higher capacity utilisation, government’s continued thrust on infrastructure spending, healthy balance sheets of banks and corporates, along with the easing of financial conditions. Merchandise exports will be weighed down by global uncertainties, while services exports are expected to remain resilient. Headwinds from global trade disruptions continue to pose downward risks.”

RBI Governor Sanjay Malhotra said, “The risks to inflation are two sided. On the upside, uncertainties may lead to possible currency pressures and imported inflation. On the downside, slowdown in global growth could entail further softening in commodity and crude oil prices, putting downward pressure on inflation. Overall, while global trade and policy uncertainties shall impede growth, its impact on domestic inflation, while requiring us to be vigilant, is not expected to be of high concern.”

With a 25 bps cut by the RBI, here is how much difference it will make in EMI:

For instance, if someone has taken a home loan of Rs 50 lakh, the tenure of which is 20 years and the interest rate is 9%, then his EMI becomes around Rs 44,986. If the bank passes the full 0.50% cut and the interest rate comes down to 8.5%, then his new EMI will be around Rs 43,391. That means saving Rs 1,595 every month, about Rs 19,140 in a year, and relief of more than Rs 3.8 lakh on the entire loan.

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The stance of monetary policy signals the intended direction of policy rates going forward. Accordingly, Sanjay Malhotra said that 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. He further added, “Let me also clarify that the stance should not be directly associated with liquidity conditions. While liquidity management is important for monetary policy including decisions related to policy rate, it is an operating tool with the RBI for various purposes including monetary policy transmission. Monetary policy decisions to change policy rates do however have implications for liquidity management, being the operational tool to carry out the policy changes. To summarise, our stance provides policy rate guidance, without any direct guidance on liquidity management.”

RBI Governor Sanjay Malhotra said, “From a cross-country perspective, monetary policy stance is typically characterised as accommodative, neutral or tightening. While an accommodative stance entails easy monetary policy that is geared towards stimulating the economy through softer interest rates; tightening refers to contractionary monetary policy whereby interest rates are hiked to restrain spending and curb economic activity, all with the objective of reining in inflation. A neutral stance is typically associated with a state of economy which neither calls for stimulating economic activity nor calls for controlling inflation by curtailing demand and provides flexibility to move in either direction on the basis of evolving economic conditions.”

Aditi Nayar, Chief Economist and Head – Research & Outreach, ICRA says, “The 25 bps cut in the repo rate was along expected lines, given the recent evolution of growth inflation dynamics. Given the burgeoning global uncertainty, the reduction in the MPC’s FY2026 forecasts for both the CPI inflation and GDP growth by 20 bps each and the change in stance to accommodative, amidst the clarity that it signals the future rate and not liquidity trajectory, we now expect an additional 50 bps of rate cuts over the next 3 policy reviews.”

RBI Governor Sanjay Malhotra said, “The Indian economy has made steady progress towards the goals of price stability and sustained growth. On the inflation front, while the sharper-than-expected decline in food inflation has given us comfort and confidence, we remain vigilant to the possible risks from global uncertainties and weather disturbances. Growth is improving after a weak performance in the first half of the financial year 2024-25, although it still remains lower than what we aspire for.”

The RBI governor said that the guidelines for co-lending will now be extended to all regulated entities. Comprehensive guidelines will be issued for loans against gold and non-fund-based entities. Additionally, he said, NPCI will be permitted to set transaction limits for UPI.

The MPC noted that inflation is currently below the target, supported by a sharp fall in food inflation. Moreover, there is a decisive improvement in the inflation outlook. Sanjay Malhotra said, “As per projections, there is now a greater confidence of a durable alignment of headline inflation with the target of 4 per cent over a 12-month horizon. On the other hand, impeded by a challenging global environment, growth is still on a recovery path after an underwhelming performance in the first half of 2024-25. While the risks are evenly balanced around the baseline projections of growth, uncertainties remain high in the wake of the recent spurt in global volatility. In such challenging global economic conditions, the benign inflation and moderate growth outlook demands that the MPC continues to support growth.” Accordingly, he added, the MPC unanimously voted to reduce the policy repo rate by 25 basis points to 6.00 per cent. Moreover, it also decided to change the stance from neutral to accommodative.

RBI Governor Sanjay Malhotra said, “Going forward, sustained demand from rural areas, an anticipated revival in urban consumption, expected recovery of fixed capital formation supported by increased government capital expenditure, higher capacity utilisation, and healthy balance sheets of corporates and banks are expected to support growth. Merchandise exports would be weighed down by the evolving global economic landscape which appears to be uncertain at the current juncture, while services exports are expected to sustain the resilience. On the supply side, while agricultural prospects appear bright, industrial activity continues to recover, and the services sector is expected to be resilient.”

The RBI governor said, “The global economic outlook is fast changing. The recent trade tariff related measures have exacerbated uncertainties clouding the economic outlook across regions, posing new headwinds for global growth and inflation. Financial markets have responded through sharp fall in dollar index and equity sell-offs with significant softening in bond yields and crude oil prices.”

RBI Governor Sanjay Malhotra said, “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. This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.”

RBI Governor Sanjay Malhotra said, “The outlook for food inflation has turned decisively positive. There has been a substantial and broad-based seasonal correction in vegetable prices. The uncertainties on rabi crops have abated considerably and the second advance estimates point to a record wheat production and higher production of key pulses over last year. Along with robust kharif arrivals, this is expected to set the stage for a durable softening in food inflation. Sharp decline in inflation expectations for three months and one year ahead period would help anchor inflation expectations going ahead. Furthermore, the fall in crude oil prices augurs well for the inflation outlook. Concerns on lingering global market uncertainties and recurrence of adverse weather-related supply disruptions pose upside risks to the inflation trajectory.”

The RBI governor said that the merchandise exports will be weighed down by global uncertainties, while services exports are expected to remain resilient.

RBI Governor Sanjay Malhotra said, “While the risks are evenly balanced around these baseline projections, uncertainties remain high in the wake of the recent spike in global volatility. The current year has been marked down by 20 basis points relative to our earlier assessment of 6.7 per cent.”

RBI Governor Sanjay Malhotra projected CPI inflation for FY26 at 4 per cent from an earlier estimate of 4.2 per cent.

Here are CPI inflation estimates as announced by the RBI:

Q1: 3.6%

Q2: 3.9%

Q3: 3.8%

Q4: 4.4%