Mumbai, Feb 8 : The Reserve Bank of India (RBI) on Thursday announced a reduction in its key repo rate by 25 basis points, bringing it down from 6.5% to 6.25%. This marks the first rate cut in nearly five years, aimed at stimulating economic growth. The decision was announced by RBI Governor Sanjay Malhotra during his first major address since assuming office in December.
The Monetary Policy Committee (MPC), composed of three RBI members and three external members, unanimously agreed to the rate cut. The last repo rate reduction occurred in May 2020, with the rate remaining unchanged across the previous 11 policy meetings.
Highlighting global challenges, Malhotra said, “High-frequency indicators are suggesting resilience in the global economy.” However, he noted that while India remains strong and resilient, it is not immune to global headwinds.
The Governor projected real GDP growth at 6.4% for the current financial year ending March. For the upcoming financial year, growth is expected to reach 6.7% in Q1, 7% in Q2, and 6.5% in both Q3 and Q4.
Retail inflation is estimated at 4.8% for the current financial year, with 4.4% anticipated in the last quarter. While core inflation is expected to rise moderately, food inflation is likely to soften, he added.
Malhotra assured that bank liquidity buffers remain sufficient and promised proactive measures to ensure stable liquidity conditions. He also stated that banks continue to demonstrate robust performance with strong returns on assets and equity.
Expressing concern over the growing prevalence of digital fraud, Malhotra called for collective action by all stakeholders. He urged banks to strengthen their preventive and detection mechanisms to address the issue effectively.
This rate cut comes as India navigates a challenging global economic environment, with the RBI signaling its intent to maintain stability while fostering growth.
