February 7, 2025 – The Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) has announced a cut in Repo Rate by 25 bps in its policy decision today. Monetary stance has been kept Neutral. The rate cut is for the first time in nearly five years, the last cut being in May 2020.

The MPC unanimously decided to cut the key rate from 6.5% to 6.25%. The MPC, which comprises three RBI members and three external members, had kept it unchanged in the last 11 policy meetings.

The Standing Deposit Facility (SDF) rate shall be 6 per cent, Marginal Standing Facility (MSF) rate, and the Bank Rate shall be 6.50 per cent.

RBI governor Sanjay Malhotra announced the policy decision this morning, citing inflation was aligning with the target.

“The policy panel has noted the decline in inflation,” he said in his first key address after taking over as the RBI Governor last December.

Governor Malhotra said the real GDP growth for the financial year (FY) 2024-2025 ending this March has been estimated to be 6.4%, according to the First Advance Estimates released by the Ministry of Statistics and Programme Implementation. He also forecast the real growth likely in the upcoming FY to be 6.7% in Q1, 7% in Q2, 6.5% in Q3, and 6.5% in Q4.

Retail inflation in the current FY is being seen at 4.8% with 4.4% in the last quarter, said the governor. Core inflation is likely to rise but remain moderate while food inflation should soften, he added.

The RBI decision is likely to lead to a fall in interest rates and Equated Monthly Instalments (EMIs) on home and personal loans, say business analysts. The rate cut can help banks reduce their lending rates, making credit more accessible and affordable for borrowers.