Reserve Bank MPC starts deliberations amid expectations of 25 bps rate cut

Mumbai: The Reserve Bank of India (RBI) on Monday started its bi-monthly monetary policy review amid expectations of a 25 bps cut in key interest rates in the backdrop of moderating inflation and the need to stimulate growth as Trump tariffs pose severe challenges to the global economy.

The decision of the six-member Monetary Policy Committee (MPC) headed by Governor Sanjay Malhotra will be announced on Wednesday.

In February, the MPC slashed the repo rate by 25 basis points to 6.25 per cent. It was the first reduction since May 2020 and the first revision after two-and-a-half years.

Experts are of the opinion that RBI’s rate-setting panel will announce another rate cut of 25 bps this week.

A research report of SBI said the global growth is likely to face significant headwinds due to non-linear yet intersecting trilemma of trade-related tariff barriers, rapid currency swings and fractured capital flows, with no country being immune to the disruptions.

It further said the trajectory of rate action by central banks, while being accommodative, may remain fuzzy.

"We expect a 25-basis point rate cut in April 2025 policy. Cumulative rate cut over the cycle could be at least 100 basis points, with 2 successive rate cuts over February and April 2025. With an intervening gap in June 2025, the second round of rate cuts could start from August 2025," said the research report from the State Bank of India’s Economic Research Department – 'Prelude to MPC Meeting: April 7-9, 2025'.

Debopam Chaudhuri, Chief Economist, Piramal Group, said it is one of the rare occasions when a confluence of declining US interest rates, stronger rupee and domestic inflation dipping below the target level is emerging.

"The RBI should make most of this opportunity and deliver a 50 bps cut in the upcoming meeting, firstly to make up for the delay in shifting its policy stance and secondly because this confluence may not last long," Chaudhuri said.

Shikhar Aggarwal, Chairman, BLS E-Services, said that as the RBI prepares to announce its upcoming monetary policy, the assisted banking service industry is eagerly awaiting measures that will boost financial inclusion and drive growth.

"We expect the RBI to introduce policies that will enhance the reach and accessibility of assisted banking services, particularly in rural and semi-urban areas. A reduction in key lending rates would also be a welcome move, as it would increase the affordability of banking services for the underserved segments," Aggarwal said.

Ashish Gupta, CEO, Fretbox, said the industry is hoping to see a continued easing of monetary policy, with a possible reduction in interest rates to stimulate borrowing and spending.

"We also expect the RBI to announce measures to improve liquidity in the financial system, which would be beneficial for startups like ours that rely on access to capital to drive growth," Gupta said.

Bajaj Broking Research said economists expect another 25 basis point cut to support growth, especially given recent external pressures.

The US imposed a 26 per cent tariff on Indian imports and is expected to reduce India’s GDP growth for FY 2025-26 by 20–40 basis points, potentially lowering it to around 6.1 per cent from the RBI’s earlier forecast of 6.7 per cent.

This may push the RBI toward further rate cuts to counter economic strain, Bajaj Broking Research said.

Besides the Governor, the MPC has two senior central bank officials and three persons appointed by the government.