Daijiworld Media Network- Mumbai

Mumbai, Apr 9: In a move aimed at revitalising the Indian economy, the Reserve Bank of India (RBI) on Wednesday reduced the key repo rate by 25 basis points, bringing it down from 6.25% to 6%. Alongside the rate cut, the central bank also shifted its monetary policy stance from "neutral" to "accommodative," signalling a clear intent to inject more liquidity and stimulate economic activity.

Addressing a press conference, RBI Governor Sanjay Malhotra stated that the decision was taken unanimously by the six-member Monetary Policy Committee (MPC), considering the prevailing macroeconomic conditions and financial outlook. “The accommodative stance will provide the necessary support for growth while ensuring inflation remains under control,” said Governor Malhotra.

He explained that the accommodative stance allows room for further easing of monetary policy if required, unlike the neutral approach which strikes a balance between tightening and easing.

The central bank also announced adjustments in associated rates: the Standing Deposit Facility (SDF) rate now stands at 5.75%, while the Marginal Standing Facility (MSF) rate and the bank rate have been revised to 6.25%.

This marks the second straight rate cut in the current calendar year, following a similar 25 basis point reduction in February – the first since May 2020. The policy shift is expected to lower borrowing costs for consumers and businesses, thereby encouraging spending, investment and overall economic momentum.

However, the RBI Governor noted that the benefits of the rate cut will depend significantly on how quickly and effectively commercial banks pass on the lower rates to borrowers.

On the inflation front, Malhotra assured that price rise has moderated, but cautioned against external threats such as the hike in US tariffs, which could pose global economic risks. He affirmed that the RBI remains vigilant and committed to maintaining adequate liquidity in the financial system.

The central bank also revised its GDP growth forecast for 2025-26 to 6.5%, down from the earlier projection of 6.7%, citing a mix of global uncertainties and domestic economic adjustments.

The policy easing comes on the heels of the Union Finance Ministry’s adherence to fiscal consolidation, with the fiscal deficit target lowered to 4.4% of GDP for 2025-26 from 4.8%. This prudent approach has created fiscal space and allowed the RBI greater flexibility to adopt a pro-growth monetary policy.