RBI Cuts Interest Rates For First Time In Nearly 5 Years To Boost Economy
February 7, 2025 | by Deshvidesh News

The Reserve Bank of India (RBI) has reduced its key repo rate for the first time in nearly five years to boost the economy. The RBI Monetary Policy Committee (MPC) has unanimously decided to cut the key rate by 25 bps from 6.5% to 6.25%, Sanjay Malhotra said this morning in his first key address after taking over as the RBI Governor last December.
The MPC, which comprises three RBI members and three external members, had last reduced the repo rate in May 2020 and kept it unchanged in the last 11 policy meetings.
Mr Malhotra said the global economic backdrop remains challenging with the global economy growing below the historical average. “High-frequency indicators are suggesting resilience in the global economy”. The Indian economy is not immune to global headwinds, but it remains strong and resilient, he said.
With receding expectations on the size and pace of rate cuts in the US, bond yields and the dollar have risen, he added.
The RBI Governor said the real GDP growth for the financial year ending this March has been estimated to be 6.4%. He also estimated the real growth expected in the upcoming financial year to be 6.7% in Q1, 7% in Q2, 6.5% in Q3, and 6.5% in Q4.
Retail inflation in the current financial year is being seen at 4.8% with 4.4% in the last quarter, said Mr Malhotra, adding that core inflation is likely to rise but remain moderate. Food inflation should soften, he said.
Stating that bank liquidity buffers are sufficient, the RBI Governor said they would take proactive measures to ensure orderly liquidity conditions for the system. Return on assets and equity are robust for banks, he said.
Mr Malhotra expressed concern over a surge in digital frauds and said it warrants action by all stakeholders. He also urged banks to improve preventive, detection methods to deal with cyber fraud.
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