RBI MPC Meeting 2025: Repo Rate Cut By 25 bps to 6.25%

The Reserve Bank of India (RBI) is set to announce its 6th and last bi-monthly monetary policy for the Financial Year 2025. The meeting of the Monetary Policy Committee headed by the new RBI Governor Sanjay Malhotra was scheduled from February 5 to 7. This will be the first RBI policy under the new Governor Sanjay Malhotra and also the first RBI MPC meeting after the Union Budget 2025-26 was presented on February 1.

RBI MPC Meeting Quiz

Key Announcements from RBI MPC Meeting 2025

Policy Repo Rate	6.25%
Standing Deposit Facility Rate	6.00%
Marginal Standing Facility Rate	6.50%
Bank Rate	6.50%
Fixed Reverse Repo Rate	3.35%
Cash Reserve Ratio	4.00%
Statutory Liquidity Ratio	18.00%

RBI MPC Meeting 2025-Latest Updates

• Repo Rate Cut: Reduced by 25 bps to 6.25% to boost economic growth.

Other Key Rates:

1. SDF Rate: 6.00%
2. MSF & Bank Rate: 6.50%

• Monetary Policy Stance: Neutral, ensuring flexibility to respond to economic uncertainties.
• GDP Growth Projections for 2025-26: 6.7%, with quarterly estimates:

1. Q1: 6.7%
2. Q2: 7.0%
3. Q3 & Q4: 6.5%

• Inflation Trends: Headline inflation softened due to lower food prices, expected at 4.2% for 2025-26.
• CPI Inflation Projections for 2025-26:

1. Q1: 4.5%
2. Q2: 4.0%
3. Q3: 3.8%
4. Q4: 4.2%

• Growth Drivers: Private consumption recovery, services sector boost, and strong rabi crop prospects.
• Risks to Economy: Geopolitical tensions, trade policy uncertainties, and financial market volatility.
• Next MPC Meeting: April 7-9, 2025.
• MPC Meeting Minutes Release: February 21, 2025.

Also Read: What Are the Benefits If the RBI Reduces the Repo Rate?

Key Monetary Policy Terms and Their Definitions

1. Policy Repo Rate

The Repo Rate (Repurchase Rate) is the interest rate at which the Reserve Bank of India (RBI) lends money to commercial banks against government securities. When the RBI increases the repo rate, borrowing becomes costlier for banks, leading to higher loan interest rates for businesses and consumers. Conversely, a lower repo rate makes borrowing cheaper, boosting economic activity.

2. Standing Deposit Facility (SDF) Rate

The Standing Deposit Facility (SDF) Rate is the interest rate at which banks can park their surplus liquidity with the RBI without providing collateral. Introduced in 2018, SDF helps the RBI absorb excess liquidity from the banking system, ensuring better control over inflation and monetary stability.

3. Marginal Standing Facility (MSF) Rate

The Marginal Standing Facility (MSF) Rate is the emergency borrowing rate for banks, allowing them to obtain short-term funds from the RBI when they face a liquidity crunch. Banks can borrow overnight funds at this rate by pledging government securities, but the MSF rate is usually higher than the repo rate to discourage excessive borrowing.

4. Bank Rate

The Bank Rate is the interest rate at which the RBI lends long-term funds to commercial banks without any collateral. Unlike the repo rate, the bank rate directly influences lending rates in the economy. It is primarily used as a tool to regulate liquidity, inflation, and money supply.

5. Fixed Reverse Repo Rate

The Fixed Reverse Repo Rate is the interest rate at which the RBI borrows money from commercial banks to absorb excess liquidity from the banking system. A higher reverse repo rate encourages banks to park their surplus funds with the RBI, reducing money circulation in the economy and controlling inflation.

6. Cash Reserve Ratio (CRR)

The Cash Reserve Ratio (CRR) is the percentage of a bank’s total deposits that must be kept with the Reserve Bank of India (RBI) in cash reserves. Banks cannot use this amount for lending or investments. A higher CRR reduces liquidity in the banking system, helping to control inflation, while a lower CRR increases liquidity, promoting economic growth.

7. Statutory Liquidity Ratio (SLR)

The Statutory Liquidity Ratio (SLR) is the minimum percentage of a bank’s total net demand and time liabilities (NDTL) that must be maintained in the form of liquid assets such as cash, gold, or government-approved securities before offering credit to customers. It ensures the bank’s financial stability and controls credit expansion.

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RBI MPC Meeting 2025 – Summary of Key Announcements

Aspect	Details
Why in News	The RBI’s 6th and final bi-monthly monetary policy for FY 2025 was announced after the MPC meeting held from February 5-7, 2025, chaired by RBI Governor Sanjay Malhotra. This was the first policy announcement under the new Governor and the first RBI MPC meeting after the Union Budget 2025-26.
Key Decisions	Repo Rate cut by 25 bps to 6.25% to boost economic growth. SDF Rate set at 6.00%, MSF & Bank Rate at 6.50%. Monetary policy stance remains neutral to balance inflation and growth.
Growth Projections	GDP growth for 2025-26 projected at 6.7%, with quarterly estimates: Q1 – 6.7%, Q2 – 7.0%, Q3 – 6.5%, Q4 – 6.5%. Growth driven by private consumption recovery, service sector boost, and strong rabi crop prospects.
Inflation Projections	CPI inflation for 2025-26 projected at 4.2%, with Q1 – 4.5%, Q2 – 4.0%, Q3 – 3.8%, Q4 – 4.2%. Headline inflation softened due to lower food prices.
Economic Risks	Geopolitical tensions, global trade uncertainties, financial market volatility, and fluctuating energy prices pose downside risks to growth and inflation.
Next MPC Meeting	Scheduled for April 7-9, 2025.
MPC Meeting Minutes Release	To be published on February 21, 2025.