RBI MPC meeting 2025: Central bank lowers repo rate by 25 bps to 6%, stance changed to accommodative

The governor also announced that the monetary stance has been changed to 'Accommodative' from 'Neutral'.

Earlier, the RBI governor, in his speech, said that the central bank is alert on emerging global developments. The governor added that the global economic outlook is changing fast and that the latest trade-related measures exacerbated uncertainties clouding the outlook across regions.

The rate cut and the change in stance were on the expected lines.

A recent research report from SBI said the global growth is likely to face significant headwinds due to the non-linear yet intersecting trilemma of trade-related tariff barriers, rapid currency swings and fractured capital flows, with no country being immune to the disruptions.

"We expect a 25-basis point rate cut in the April 2025 policy. Cumulative rate cuts over the cycle could be at least 100 basis points, with 2 successive rate cuts over February and April 2025. With an intervening gap in June 2025, the second round of rate cuts could start from August 2025," said the research report from the State Bank of India’s Economic Research Department – 'Prelude to MPC Meeting: April 7-9, 2025'.

This was the second straight rate cut by the RBI. In February, the MPC slashed the repo rate by 25 basis points to 6.25 per cent. It was the first reduction since May 2020 and the first revision after two and a half years.

RBI lowers GDP growth forecasts

Citing uncertainties amid an ongoing trade war, the governor announced that the central bank has lowered India's GDP growth projection for FY26 to 6.5% from an earlier estimate of 6.7%.

The central bank has projected 6.5% growth in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.

Governor Malhotra added that global uncertainties may put further pressure on currency.

Last week, US President Donald Trump announced a hefty 26% reciprocal tariff on Indian imports, effective April 9.

Inflation projection

On the positive front, RBI lowered the FY26 inflation projection to 4% from 4.2% projected earlier.

"CPI inflation is projected to average 4% in 2025-26 – 3.6% in Q1, 3.9% in Q2, 3.8% in Q3, and 4.4% in Q4, with risks evenly balanced," the RBI statement read.

The governor added that uncertainties about Rabi crops have abated considerably, and the second advance estimates point to record wheat production.

On the liquidity front, the governor added that system liquidity was in deficit in January. But, as a result of a slew of measures, it tapered during February and March and has now turned into a surplus.

Governor Malhotra further said that forex reserves as of April 4 stood at $676 billion, providing import cover for 11 months.

What experts say

Puri opined that RBI’s decision to reduce the repo rates by 25 bps (to 6%) the second time this year was expected against the backdrop of moderating inflation. Home loan borrowers may not see much meaningful or immediate interest rate relief. Banks have not transmitted earlier MPC rate cuts to borrowers because of higher funding costs, pressure on net interest margins, higher NPAs, and a cautious lending climate.

If banks do pass on the benefits of the last two rate cuts, it will be a boost to homebuyers, particularly for those eyeing affordable housing. Many first-time homebuyers who had been hesitating to take the plunge may make their move if home loan rates reduce.