Reserve Bank's MPC meeting begins; 25 basis points cut in repo rate expected, decision on Wednesday

The Reserve Bank on Monday initiated its Monetary Policy Committee meeting, which is after a two-month gap. Considering the easing on the inflation side, the MPC is likely to decrease interest rates by 25 basis points. An issue has come in the face of the global economy after US President Donald Trump imposed retaliatory tariffs. In the wake of the current global environment, a growth boost is also required from the MPC.

The decision of the six-member Monetary Policy Committee (MPC) under the leadership of Governor Sanjay Malhotra will be made on Wednesday. The MPC had last cut the repo rate by 25 basis points to 6.25 percent in February. This was the lowest cut since May 2020 and the second revision in it since a gap of two and a half years. The RBI's rate formation committee is likely to cut another 25 basis points this week, according to experts.

An SBI research report said that trade-related tariff barriers, sharp fluctuations in the currency market, and soft global capital flows could pose significant obstacles to growth around the world. No country is untouched by these conditions. The report further said that the direction of change in interest rates by central banks may remain liberal.

The research report of the Economic Research Department of the State Bank of India - 'Introduction to the MPC Meeting: April 7-9, 2025' states, "We expect a rate cut of 25 basis points in the April 2025 policy. After February, there may be 2 successive rate cuts in April 2025. After this, the second round of rate cuts may start from August 2025, except June 2025." According to Debopam Chaudhary, Chief Economist of Piramal Group, this is one of the rare occasions when interest rates in the US are falling, the rupee is strengthening and the domestic inflation level is below the target.

Chaudhary said, "RBI should take full advantage of this opportunity and cut the repo rate by 50 basis points in the upcoming meeting. First of all, this will compensate for the delay in changing the policy stance. Secondly, this opportunity will not be available for a long time." According to Shikhar Aggarwal, President of BLS E-Services, the ancillary banking services industry is eagerly awaiting the MPC's decisions. The MPC's decision will accelerate growth by promoting financial inclusion. "We expect the RBI to introduce policies that will increase the reach of ancillary banking services, especially in rural and semi-urban areas," Aggarwal said.

FreightBox CEO Ashish Gupta said the industry expects continued easing of monetary policy, with interest rates likely to be cut to encourage borrowing and spending. "We also expect the RBI to announce measures to improve liquidity in the financial system, which will be beneficial for startups like us, who depend on access to capital to fuel growth," Gupta said. Bajaj Broking Research said economists expect a further rate cut of 25 basis points to support growth, especially given recent external pressures.

The US has imposed a 26 percent tariff on Indian imports and this is expected to reduce India's GDP growth rate for FY2025-26 by 20-40 basis points, potentially bringing it down to around 6.1 percent from the RBI's earlier estimate of 6.7 percent. This could force the RBI to cut rates further to deal with economic pressure, Bajaj Broking Research said. Apart from the governor, the MPC consists of two senior officials of the central bank and three government appointees.