The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) meeting is set to begin today, April 7 in Mumbai. The meeting will conclude on Wednesday, April 9. RBI Governor Sanjay Malhotra will announce the meeting’s outcome, on April 9 at 10 AM. Moreover, the meeting will focus on analysing the current economic conditions and deciding on the policy rates.
A report by the State Bank of India (SBI) stated that a further 25-basis point rate cut is expected in this meeting. The report predicted a cumulative rate cut of at least 100 basis points through the cycle. According to the report, RBI to take a path of two successive rate cuts in February and April 2025, followed by a pause in June, with the next round of cuts likely to resume from August 2025.
However, the report also cautioned that deposit mobilization by banks may become a challenge during the rate-easing cycle. This challenge is likely to be worsened by low tax-adjusted returns for savers and a complete shift towards the Just-In-Time (JIT) mechanism.
It said, “We expect a 25-basis point rate cut in April’25 policy. The cumulative rate cut over the cycle could be at least 100 basis points.”
In its last monetary policy announcement on February 7, the MPC unanimously decided to reduce the policy repo rate by 25 basis points from 6.5% to 6.25%. This was the first-rate cut in the current easing cycle.
RBI MPC: What Economists Are Saying?
Economists are saying that a rate cut is necessary to support economic growth. Some advocate for a 50-basis-point (bps) reduction, while others expect a more cautious approach.
Debopam Chaudhuri, Chief Economist at Piramal Group, believes that the RBI should adopt a more accommodative stance. He highlighted that the economic slowdown in the latter half of FY25 was partly due to high borrowing costs and slow credit growth. Therefore, policymakers should take measures to ease these bottlenecks.
“A 50 bps rate cut seems to be the need of the hour. Whether RBI will consider it is difficult to predict. At a time when all three major data trends, viz., softer inflation, manageable bank liquidity deficit and improving INR support a rate cut environment, the MPC may move fast,” Chaudhuri said.
However, Sonal Badhan, Economics Specialist at Bank of Baroda, expects the RBI to take a more gradual approach. She predicts a 25 bps rate cut in April, with a total reduction of 75 bps in this cycle.
