The Reserve Bank of India (RBI) has decided to reduce the repo rate by 0.25% for the first time in almost five years, keeping its approach "neutral." This means the cost for banks to borrow money from the RBI has been lowered. The new rates are: the standing deposit facility (SDF) rate is now 6%, and both the marginal standing facility (MSF) and Bank Rate are at 6.5%.

RBIGovernor Sanjay Malhotra shared that inflation is now in line with the target, leading the Monetary Policy Committee (MPC) to unanimously decide to reduce the repo rate and maintain the current stance.

He also stated that, “The MPC has unanimously decided to reduce the policy repo rate by 0.25% from 6.50% to 6.25%. The committee also agreed to maintain a neutral stance, prioritizing inflation alignment with the target while supporting economic growth.”

After holding the repo rate steady at 6.5% for eleven consecutive meetings, the Reserve Bank of India (RBI) cut rates in February 2025 due to concerns over slowing economic growth and inflation nearing the 4% target.

This shows RBI’s first rate cut in nearly five years. The last reduction was in May 2020, when the repo rate was lowered by 0.40% to 4%.

RBI policy: Key takeaways

The RBI's monetary policy committee (MPC) has cut the benchmark policy rate by 25 bps to 6.25% from 6.50%, aligning with market expectations post-Budget 2025. This move comes amid global uncertainties and concerns over slowing economic growth. While the RBI expects real GDPgrowth for FY26 to be 6.7%, it also highlighted risks from global factors. The GDP growth projection for the current fiscal year (FY25) has been revised to 6.4%, down from 6.6% in December. For FY26, growth estimates stand at 6.7% in Q1 (earlier 6.9%), 7.0% in Q2 (earlier 7.3%), and 6.5% for both Q3 and Q4.