LIVE: RBI slashes repo rate by 25 bps, trims GDP forecast for FY26 to 6.5 pc
Monetary Policy Committee changes policy stance to 'accommodative' from 'neutral'; global uncertainties may put more pressure on currency, says RBI Governor
The Reserve Bank of India (RBI) on Wednesday (April 9) slashed key interest rate by 25 basis points, for the second time in a row, to support a shuttering economy hit by reciprocal tariffs imposed by the US.
Following the rate cut, the key policy rate eased to 6 per cent providing relief to home, auto and corporate loan borrowers.
In its last policy in February, RBI had trimmed repo rate by 25 basis points to 6.25 per cent. This rate came after previous rate reduction in May 2020. The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5 per cent.
The Monetary Policy Committee (MPC) unanimously decided to slash the policy rate by 25 basis points to 6.25 per cent, RBI Governor Sanjay Malhotra said.
GDP forecast
The RBI has lowered the GDP growth forecast to 6.5 per cent from earlier projection of 6.7 per cent due to global uncertainties.
Last week, US President Donald Trump had announced a hefty 26 per cent reciprocal tariffs on Indian imports, effective today.
Also read: RBI rate cut: Relief for common man as car, home loans may get cheaper
Investment activity has gained traction, and is expected to improve further on back of sustained capacity utilisation, said the Governor. He added that global uncertainties may put further pressure on the currency.
The rate-setting panel has decided to change the policy stance to 'accommodative' from 'neutral'. "Our stance provides policy rate guidance without any guidance on liquidity management," he Malhotra.
Read the live update below.
Live Updates
- 9 April 2025 11:35 AM GMT
Sales of affordable mid-income homes may rise: Realtors on RBI policy
Real estate developers expect sales of housing properties, especially units costing below Rs 1 crore, to rise following the RBI's decision to reduce the repo rate, a move that will prompt banks to reduce interest rates on home loans.
Realtors' apex bodies CREDAI and NAREDCO, which have more than 16,000 developers as members, hailed the RBI's move to reduce the repo rate by 25 basis points, saying this will stimulate housing demand. Builders urged banks to pass on the benefit to their customers.
According to PropEquity and Anarock data, housing sales declined 23 per cent and 28 per cent, respectively, annually during the January-March quarter of this year.
Commenting on the move, CREDAI National President Boman Irani said the rate cut is well-timed to uplift consumer sentiment and enhance borrowing capacity, especially in the housing sector.
"It is likely to improve home loan affordability, stimulate housing demand, and provide a strong impetus to the mid-income and affordable segments, where interest rate sensitivity remains high," Irani said.
NAREDCO National President G Hari Babu said the RBI decision will give a boost to the real estate sector.
- 9 April 2025 11:33 AM GMT
RBI rate cut will benefit auto sector, create positive sentiment: SIAM
The automotive sector will benefit from the RBI cutting the key interest rate by 25 basis points as it will decrease financing costs and create positive sentiments in the market, the Society of Indian Automobile Manufacturers said on Wednesday.
A reduction in rates at this time would have a positive impact on the auto sector, Society of Indian Automobile Manufacturers (SIAM) President Shailesh Chandra said in a statement.
Chandra, who is also Managing Director of Tata Passenger Vehicles Ltd & Tata Passenger Electric Mobility Ltd, further said, "It will increase accessibility by reducing the financing costs, thereby creating a positive sentiment across the market."
Commenting on the development, Renault India Country CEO & MD Venkatram Mamillapalle said, "We hope financial institutions will pass on these benefits to borrowers more effectively. This move could significantly impact the automobile sector, especially if lending rates soften further."
Lower EMIs can influence buying decisions, particularly in entry-level and mid-size segments, he said, adding, "combined with the finance minister's zero tax announcement up to Rs 12 lakh, the current policy landscape could enhance consumer affordability and stimulate demand across urban and rural markets".
- 9 April 2025 8:11 AM GMT
Economists and industry leaders seek deeper rate cut
The RBI’s decision to cut repo rate by 25 basis points has drawn mixed reactions from industry experts, with many believing that a sharper reduction was required to support economic growth better.
Jyoti Prakash Gadia, Managing Director at Resurgent India, told news agency ANI: “Considering the controlled level of inflation, expected normal monsoon and comparative sluggish growth trends, a higher rate cut of 50 basis points could have been considered by RBI which would have paved the way for creating a more enabling environment for a higher growth trajectory.”
Upasna Bhardwaj, Chief Economist at Kotak Mahindra Bank, echoed him. “We note the increasing global turmoil and its spillovers to the Indian growth slowdown will necessitate the MPC for deeper rate cuts. We see scope for additional 75-100bp of rate cuts in the year ahead depending on the scale of global slowdown,” she said.
Chandrajit Banerjee, Director General of CII, stressed the urgency of lowering real interest rates further to revive investment demand.
“The RBI’s rate cut, and stance change reflect concerns about the impact of slower global growth on domestic economic growth and a relatively benign outlook for domestic inflation. Moreover, with real interest rates being still high at 2.6 per cent after the rate cut in February, there was an urgent need for the rates to come down further to boost investment demand,” he noted. - 9 April 2025 8:11 AM GMT
RBI Governor hints at more rate cuts in coming months
After effecting two back-to-back 25 basis points rate cuts, RBI Governor Sanjay Malhotra on Wednesday hinted at another reduction in key policy rate by changing the central bank’s monetary stance to “accommodative” from “neutral”, which may further lower EMIs for consumers.
The bi-monthly monetary policy is scheduled to be announced on June 6.
Governor Malhotra explained that in the context of the RBI, the stance of monetary policy signals the intended direction of policy rates going forward.
“Accordingly, with respect to the policy rate, which is the mandate of the MPC, today’s change in stance from ‘neutral’ to ‘accommodative’ means that going forward, absent any shocks, the MPC is considering only two options — status quo or a rate cut,” he said.
He also clarified that the stance should not be directly associated with liquidity conditions.
Dwelling on the monetary policy stance, Malhotra said that from a cross-country perspective, monetary policy stance is typically characterised as accommodative, neutral or tightening.
While an accommodative stance entails easy monetary policy that is geared towards stimulating the economy through softer interest rates; tightening refers to contractionary monetary policy whereby interest rates are hiked to restrain spending and curb economic activity, all with the objective of reining in inflation.
A neutral stance, he said, is typically associated with a state of economy which neither calls for stimulating economic activity nor calls for controlling inflation by curtailing demand and provides flexibility to move in either direction on the basis of evolving economic conditions.
- 9 April 2025 8:10 AM GMT
RBI permits NPCI to enhance UPI transaction limits for P2M payments
The RBI has permitted the National Payments Corporation of India (NPCI) to upwardly revise transaction limits in UPI for person-to-merchant payments (P2M) based on evolving user needs.
At present, the transaction amount for UPI, covering both Person to Person (P2P) and Person to Merchant payments (P2M), is capped at Rs 1 lakh except for specific use cases of P2M payments which have higher limits, some at Rs 2 lakh and others at Rs 5 lakh.
RBI Governor Sanjay Malhotra said appropriate safeguards will be put in place to mitigate risks associated with higher limits.
P2P transactions on UPI, however, will continue to be capped at Rs 1 lakh.
