The Monetary Policy Committee, under the leadership of new Governor Sanjay Malhotra, announced a 25-basis points reduction in the repo rate, lowering it to 6.25%. The move comes a week after the Central Government cut personal income tax to boost consumption.

The Monetary Policy Committee Meeting from 5^th February to 7^th February 2025 announced this in consonance with achieving a medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth.

The global economy is growing below the historical average even though high-frequency indicators suggest resilience amid continued expansion in world trade. The world economic landscape remains challenging with a slower pace of disinflation, lingering geopolitical tensions and policy uncertainties.

“Today's rate cut by 25 basis points after a gap of nearly five years is much in line with our expectations and set to provide overall support as well as be a catalyst to growth enablers outlined in the recent union budget. The benefits of this rate will begin to accrue on an immediate basis and are expected to be fully realized in the next 3 to 6 months, benefiting customers. This step is in the right direction aligning with the sustained central bank assurance of proactive liquidity support and allaying concerns of liquidity crunch, thereby accelerating growth.” said Rishi Anand, MD& CEO, of Aadhar Housing Finance Limited.

They also launched a special internet domain bank.in for the banking sector to combat financial fraud, along with stricter authentication protocols for digital transactions, while unveiling the Monetary Policy on Friday.

“The launch of a special internet domain, bank.in, is a significant step by the RBI to reduce cybersecurity threats and malicious activities, though clear instructions on the domain are awaited. However, this initiative will empower banks to streamline and secure their financial services, enhancing digital trust in the industry. Furthermore, the RBI plans to launch an exclusive domain for non-banking entities – fin.in, showcasing the RBI’s approach to providing a robust and secure financial ecosystem to the consumer.” said Ankit Ratan, Co-founder & CEO, of Signzy.

The MPC noted that inflation has declined, supported by the favourable outlook on food and the continuing transmission of past monetary policy actions it is expected to further moderate in 2025-26, gradually aligning with the target. The growth is also expected to recover from the low of Q2-2024-25. These growth-inflation dynamics open up space for monetary policy actions to support growth. The global financial markets’ volatility consistent trade war and adverse weather events pose risks to the growth inflation outlook. This demands MPC remain vigilant.