In a major policy announcement, the Reserve Bank of India (RBI), under the leadership of its new Governor, Sanjay Malhotra, has reduced the repo rate by 25 basis points (bps) from 6.5% to 6.25%. This marks the first rate cut since 2020 and signals a shift in the central bank’s monetary stance to stimulate economic growth.
Key Announcements from the Monetary Policy Statement:
- Policy Rate: Cut by 25 bps to 6.25%
The MPC decided unanimously to reduce the policy rate by 25 basis points from 6.5% to 6.25%. Consequently, the standing deposit facility SDF, the SDF rate shall be at 6.0% and the marginal standing facility rate, also called the MCF rate, and the bank rate shall be 6.5%, said RBI governor Sanjay Malhotra.
About Sanjay Malhotra:
- Education: Bachelor’s in Computer Science (IIT Kanpur), Master’s in Public Policy (Princeton University)
- Career: Over 33 years of experience in finance, taxation, power, and IT
- Previous Role: Secretary (Revenue), Ministry of Finance
The decision follows the sixth and final bi-monthly meeting of the Monetary Policy Committee (MPC) for FY25, conducted from February 5 to 7, 2025, marking the first policy meeting under Sanjay Malhotra after the Union Budget 2025-26 presentation.
Sectoral Implications:
The rate cut is expected to benefit sectors including:
- Consumer Durables: Lower EMIs may drive demand for household goods
- Housing Finance and Real Estate: Cheaper home loans could stimulate sales
- Automobiles: Financing costs to reduce, boosting vehicle sales
- NBFCs and Financials: Increased liquidity could support lending
Market analysts anticipate a positive impact on consumption and investments, as the lower cost of borrowing could spur demand across key sectors.
Disclaimer: The information provided is for informational purposes only and should not be considered financial or investment advice. Always consult a financial advisor before making investment decisions.
