Announcements of the RBI Monetary Policy Meeting repo rate: As of right now, the repo rate was 6.5%. The action was taken just one week after the Centre lowered personal income taxes in an effort to increase spending.
RBI MPC Meeting February 2025: After maintaining it at the same level for two years, the Reserve Bank of India’s (RBI) six-member Monetary Policy Committee (MPC) reduced the repo rate, or the rate at which the RBI lends to other banks, by 25 basis points to 6.25% on Friday. The RBI hasn’t lowered interest rates in five years, with the most recent one occurring in May 2020.
As of right now, the repo rate was 6.5%. The action was taken just one week after the Centre lowered personal income taxes in an effort to increase spending.
In an attempt to boost economic activity by making borrowing more affordable, the RBI’s MPC unanimously decided to decrease the repo rate, which in turn encouraged investment and spending.
RBI Governor Sanjay Malhotra made the announcement, stating that average inflation has decreased since the framework’s adoption and that it has benefited the Indian economy throughout the years, despite the extremely difficult time following the pandemic. With the exception of a few instances when it has exceeded the upper tolerance band, he continued, the CPI has generally been in line with the target since the framework’s implementation.
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With US President Donald Trump putting tariffs on China, Canada, and Mexico, the policy is being announced in the midst of global unrest. A month has been added to the tariffs on Canada and Mexico. The dollar rose against other major currencies on Monday as a result of the tariffs, which have also sparked fears of international trade battles. The rupee fell to its lowest point ever, below the 87-level.
However, in early Friday trading, the rupee regained 16 paise from its lowest closing level ever, reaching 87.43 against the US dollar.
All external benchmark lending rates (EBLR) that are tied to the repo rate will decrease when the RBI lowers the repo rate, which will benefit borrowers by lowering their equated monthly installments (EMIs).
In cases where the full transmission of a 250 basis point increase in the repo rate between May 2022 and February 2023 has not occurred, lenders may also lower interest rates on loans that are tied to the marginal cost of fund-based lending rate (MCLR).
How about the GDP forecast?
Approximately 6.7% GDP growth is projected by the central bank for the upcoming fiscal year, Governor Sanjay Malhotra declared. Approximately 6.7% GDP growth is projected by the central bank for the upcoming fiscal year, Governor Sanjay Malhotra declared. For the fiscal year 2025–2026, the MPC has also forecast retail inflation at 4.2%.
Based on a “strong external account, calibrated fiscal consolidation, and stable private consumption,” the administration predicted a growth rate of 6.3-6.8% for 2025–2026 in the Economic Survey that was published before to the Budget.
This occurred against the backdrop of a faltering economy, predicted to grow at its slowest rate in four years, 6.4%, in 2024–2025.
What occurs if the repo rate is cut?
All external benchmark lending rates (EBLR) that are tied to the repo rate will decrease when the RBI lowers the repo rate, which will benefit borrowers by lowering their equated monthly installments (EMIs).
In cases where the full transmission of a 250 basis point increase in the repo rate between May 2022 and February 2023 has not occurred, lenders may also lower interest rates on loans that are tied to the marginal cost of fund-based lending rate (MCLR).
