RBI Monetary Policy: Repo rate trimmed by 25 bps, growth in focus— 5 key takeaways from April MPC meeting

RBI Monetary Policy: Keeping some powder dry for global uncertainties and weather-related disruptions, the Reserve Bank of India (RBI) refrained from a deeper rate cut and announced the repo rate cut by 25 basis points as expected on Wednesday, April 9. The six-member Monetary Policy Committee (MPC) of the RBI voted unanimously to cut the repo rate by 25 bps to 6 per cent, effective immediately.

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RBI MPC met on April 7, 8 and 9 to decide on the policy rates and stance.

RBI April Policy: Key Takeaways

Let's take a look at five key takeaways from RBI MPC's April meeting:

1. Rates down, stance changes

RBI Governor Sanjay Malhotra announced a 25 bps cut in the repo rate. Consequently, the standing deposit facility (SDF) rate is 5.75 per cent, and the marginal standing facility (MSF) rate and the bank rate are adjusted to 6.25 per cent.

The MPC also changed its policy stance to ‘accommodative’ from ‘neutral’.

2. Inflation to remain at comfortable levels in FY26

RBI believes inflation will decline further, remaining comfortable this year as the central bank trimmed inflation projection for the current financial year to 4 per cent against 4.2 per cent earlier, with Q1 at 3.6 per cent (against 4.5 per cent earlier), Q2 at 3.9 per cent (against 4 per cent earlier), Q3 at 3.8 per cent (same as previous estimates), and Q4 at 4.2 per cent (against 4.4 per cent earlier).

"CPI inflation for the financial year 2025-26 is projected at 4 per cent, with Q1 at 3.6 per cent, Q2 at 3.9 per cent, Q3 at 3.8 per cent, and Q4 at 4.4 per cent. The risks are evenly balanced," said the RBI Governor.

3. Growth estimates lowered

Highlighting the impact of global trade and policy uncertainties, RBI cut GDP growth projections for FY26 to 6.5 per cent from 6.7 per cent earlier, with projections for Q1FY26 cut to 6.5 per cent from 6.7 per cent, for Q2 cut to 6.7 per cent from 7 per cent. For Q3, the growth estimate was revised to 6.6 per cent from 6.5 per cent, but for Q4, it was cut to 6.3 per cent from 6.5 per cent.

"Real GDP growth for 2025-26 is now projected at 6.5 per cent, with Q1 at 6.5 per cent, Q2 at 6.7 per cent, Q3 at 6.6 per cent, and Q4 at 6.3 per cent. The risks are evenly balanced," said Governor Malhotra.

4. CAD may remain within a sustainable level

Governor Malhotra, in his policy statement, underscored India's net services and remittance receipts may remain in large surplus, partly offsetting the trade deficit.

"India’s services exports remained resilient in January-February 2025, driven by software, business and transportation services.15 Going forward, net services and remittance receipts are expected to remain in large surplus, partly offsetting the trade deficit. The CAD (current account deficit) for 2024-25 and 2025-26 are expected to remain well within the sustainable level," said the Governor.

5. Additional measures

The RBI Governor announced the following six additional measures related to banking regulation, fintech and payment systems:

(i) He proposed enabling securitisation of stressed assets through market-based mechanism, in addition to the existing ARC route.

(ii) The RBI Governor proposed to extend the scope of co-lending to all regulated entities and to all loans.

(iii) The RBI will issue comprehensive regulations on prudential norms and conduct related aspects for gold loans.

(iv) Governor Malhotra also proposed comprehensive guidelines to harmonise the regulations governing non-fund-based facilities across regulated entities.

"Instructions related to partial credit enhancement (PCE) by regulated entities are also proposed to be revised. This is expected to broaden the funding sources for infrastructure financing," said Malhotra.

(v) The Governor said NPCI will decide the transaction limits in UPI for person to merchant transactions, in consultation with the banks and other stakeholders.

(vi) He proposed making the Regulatory Sandbox theme-neutral and ‘on-tap’.

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