RBI reduces repo rate cut by 25 basis points to 6.25%

RBI Governor announces MPC decisio amid expectations of interest rate reduction.

RBI Governor Sanjay Malhotra, who is chairing his first Monetary Policy Committee (MPCC) meeting announced the decision of the six-member panel on Friday (February 7, 2025) morning, amid widespread expectations of 25 basis points reduction in interest rate after a gap of nearly five years.

After a detailed assessment of the evolving macroeconomic and financial developments and the outlook, the MPC decided unanimously to reduce the policy rate by 25 basis points to 6.25% from 6.5%.

The current repo rate stands at 6.50%, and the RBI has kept it unchanged for the past eleven consecutive meetings.

The flexible inflation targeting framework has served the economy very well, especially in the pandemic-affected period, the RBI Governor said. “The interest of the economy demands financial stability and consumer protection and our mandate at the RBI is to ensure both of them,” he said.

We recognise that just like there are no free lunches, that regulations for enhancing financial stability and customer protection also come with costs. We will strive to strike a right balance between efficiency and regulation, the Governor added.

Experts anticipated that the central bank may cut the repo rate by 25 basis points (bps) to support economic growth while keeping inflation under control.

The Reserve Bank of India (RBI) had last reduced the repo rate by 40 basis points to 4% in May 2020 to help the economy tide over the crisis following the outbreak of the Covid pandemic and subsequent lock down.