The RBI has cut the benchmark repo rate by 25 basis points (bps) to 6.25% from 6.5%, RBI Governor Sanjay Malhotra announced in the sixth and final bi-monthly monetary policy of FY25.
The meeting of RBI’s six-member Monetary Policy Committee (MPC) scheduled from February 5 to 7 was headed by Governor Sanjay Malhotra. This marks the first RBI policy under him and also the first RBI MPC meeting after the Union Budget 2025-2026.
The key focus of the policy was:
Reduction in Repo Rate
For the first time in the last five years, the benchmark repo rate has been reduced from 25 basis points (bps) to 6.25% from 6.5%.
GDP Projections:
Real GDP growth for the next year has been estimated at about 6.75%. For the first quarter, it is estimated to be 6.7%, for the second quarter, the estimate is 7%, and it is 6.5% for both the third quarter and fourth quarter.
CPI Inflations
CPI inflation for FY25 has been retained at 4.8% with Quarter 4 FY25 at 4.4%.
The inflation rate projection for 2026, assuming a normal monsoon stands at 4.2% with 4.5% for Quarter 1, 4.0% for Quarter 2, 3.8% for Quarter 3, and Quarter 4 at 4.2%
Sharing that Inflation targeting has served the Indian economy very well, Governor Malhotra stated, “CPI has mostly stayed aligned with the target given under this framework, barring a few occasions of breaching the upper tolerance ban.”
Healthy financial systems:
RBI Governor said, “The financial or the system level, financial parameters for the scheduled commercial banks continue to be healthy.”
He shared that the Credit deposit ratio for the banking system standing at 80.8% at the end of January 2025 remains the same as 30th September 2024.
He added, “Bank liquidity buffers are sufficient, though the net interest margin moderated return on assets and return on equity are robust. The system level parameters, or NBFCs too, are very healthy.”
LCR Guidelines
RBI Governor shared that Liquidity Coverage Ratio (LCR) norms will not be implemented before March 31, 2026 therefore sufficient timeframe would be given to implement LCR guidelines. He said, “We do not want to cause disruption and will ensure a smooth transition.”
LCR refers to the measure of the percentage of highly liquid assets that banks must maintain. As per the updated LCR norms by RBI banks are instructed to hold a higher portion of high-quality liquid assets (HQLAs), which could limit their lending capacity.
RBI to allow access of SEBI-registered non-bank brokers to NDS-OM
Non-bank brokers registered with SEBI can now directly access NDS-OM, on behalf of their clients, subject to the regulations and conditions laid down by the Reserve Bank.
The Negotiated Dealing System – Order Matching (NDS-OM) is an electronic trading platform for secondary market transactions in government securities whose access till now was available to only the regulated entities, the clients of banks, and standalone primary dealers.
