RBI Slashed Repo Rate by 25 Basis Points: Changed Policy Stance to Accommodative

The Reserve Bank of India (RBI) wrapped up its first Monetary Policy Meeting (MPC) for the Fiscal Year 2025-2026, which took place from April 7 to April 9, 2025. The April RBI policy meeting takes place against the backdrop of escalating global trade tensions, fueled by tariff increases in the US, which have raised concerns about a potential global recession.

RBI Cut Repo Rate by 25 Basis Points

During the meeting, the RBI decided to reduce the benchmark repo rate by 25 basis points, marking the second consecutive rate cut. This follows the first interest rate cut in five years in February 2025. The new repo rate now stands at 6%, down from the previous 6.25%.

The decision was made unanimously by the RBI’s Monetary Policy Committee (MPC), which also decided to reduce the Standard Deposit Facility (SDF) rate and the Marginal Standing Facility (MSF) rate by 25 basis points, in line with the repo rate adjustment. In addition, the central bank shifted its policy stance from “neutral” to “accommodative,” a move also unanimously approved by the MPC.

RBI on Inflation and GDP Growth

The RBI revised its inflation and growth projections for FY26. The Consumer Price Index (CPI) inflation forecast was lowered to 4% from the earlier projection of 4.2%. The quarterly estimates for CPI inflation are as follows:

• Q1FY26: Reduced to 3.6% from 4.5%

• Q2FY26: Reduced to 3.9% from 4.0%

• Q3FY26: Maintained at 3.8%

• Q4FY26: Raised to 4.4% from 4.2%

In terms of GDP growth, the RBI has lowered its forecast for FY26 to 6.5% from 6.7%. The revised quarterly projections for GDP growth are:

• Q1FY26: Cut to 6.5% from 6.7%

• Q2FY26: Cut to 6.7% from 7.0%

• Q3FY26: Cut to 6.6% from 6.5%

• Q4FY26: Cut to 6.3% from 6.5%

Conclusion

The RBI’s decisions reflect a more cautious outlook on the economy, with rate cuts aimed at stimulating growth while adjusting inflation and GDP growth projections in response to evolving economic conditions. This accommodative stance is likely to support economic recovery in the short term, with the central bank closely monitoring inflationary pressures and growth trends moving forward.

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