Mumbai: Reserve Bank of India (RBI) Governor Sanjay Malhotra said on Wednesday that the Bank’s Monetary Policy Committee (MPC) unanimously voted in favour of cutting the benchmark repo rate by 25 basis points to 6%. The MPC has also lowered the real GDP growth forecast for FY25-26 to 6.5% from 6.7% (announced in February) due to global uncertainties, Malhotra announced.
The quarter-wise GDP projection stands at 6.5% for Q1, 6.7% for Q2, 6.6% for Q3 and 6.3% for Q4, as per the RBI Monetary Policy 2025. Malhotra also said that the MPC has decided to change its policy stance to ‘accommodative’ from ‘neutral’.
“On the inflation front, while a sharper than expected decline in food prices has given us comfort, we remain vigilant to possible risks from global uncertainty and weather disruptions,” Malhotra said at a press conference.
This is RBI’s second repo rate cut in a row. In its last policy review in February, RBI had lowered the benchmark repo rate by 25 basis points to 6.25%, its first rate cut in nearly five years. The RBI Governor noted that the new fiscal year has begun on an anxious note.
Cutting of the repo rate did not come as a surprise to experts who had forecast such a move to moderate inflation and stimulate growth as Donald Trump’s tariffs pose severe challenges to the global economy.
Malhotra also announced that the central bank will soon issue comprehensive regulations for loans backed by gold, aiming to bring greater clarity and consistency in the sector. He also said RBI plans to harmonise norms for non-fund based credit facilities, such as guarantees and letters of credit, to streamline lending practices across financial institutions.
RBI also announced non-policy measures to strengthen credit markets. The central bank plans to enable securitisation of stressed assets through a market-based mechanism, expanding beyond the current Asset Reconstruction Company (ARC) route. Additionally, co-lending guidelines — currently limited to partnerships between banks and NBFCs for priority sector lending — will be extended to all regulated entities and loan categories.
“The Weighted Average Call Rate (WACR) has softened and stayed close to the repo rate since the last policy meeting. We will keep a close watch on evolving liquidity conditions. The banking system remains strong, with liquidity buffers comfortably above the regulatory requirements. The system liquidity deficit eased over the past two months, turning into a surplus on March 29. With government spending gaining momentum, liquidity conditions improved significantly, resulting in a surplus of Rs 1.5 lakh crore as of April 7,” he noted.
