REPO RATE CUT: RBI Governor Malhotra Hints at More in Coming Months after two back-to-back cuts

RBI Governor Sanjay Malhotra Announces the First Bi-monthly Monetary Policy, In Mumbai on April 9, 2025. Photo Credit: X/@RBI Via PTI

After Effecting Two Back-to-Back 25 Basis Points Rate Cuts, Reserve Bank Governor Sanjay Malhotra on Wednsday (April 9, 2025) Bank’s Monetary Stance to ‘Accomodative’ From ‘Neutral’, which may further lower emis for consumers.

The bi-monthly Monetary Policy is Scheduled to Be Announced on June 6, 2025.

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Unveiling the April Monetary Policy after meeting of the Monetary Policy Committee (MPC), Governor Malhotra said that in the context of the rbi, the stance of monetary Signals of Monetary Signals of Policy Rates Going forward.

“Accordingly, with respect to the policy rate, which is the mandate of the mpc, today’s change in stance in stance from ‘neutral’ to ‘Accommodative’ means that that going forward, Absent any shocks, the mpcx Only two options – status quo or a rate cut, ”He said.

He also Clarified that the stance should not be directly associated with liquidity conditions.

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Dwelling on the Monetary Policy Stance, Mr. Malhotra said that from a cross-country percent, Monetary Policy Stance is Typical Characterized as Accommodative, Neutral or Tightening.

While An Accommodative Stance Entails Easy Monetary Policy that is Geared Towards Stimulating The Economy Through Softer Interest Rates; Tightening referrs to contractionary monetery policy whereby interest rates are hiked to restrain speeding and curb economic activity, all with the objective of reening in infection.

A Neutral Stance, He Said, is Typically Associated with a State of Economy which neither calls for stimulating economic activity noor calls for controling information by Curtailing Demand and Provide Flexibility to move in either direct on the Basis of Evolving Economic Conditions.

In February, the mpc slashed the repo rate by 25 Basis points to 6.25%. It was the first Reduction Since May 2020 and the first revision after two-sand-a-half years.

Governor Malhotra Further Said While Liquidity Management is important for Monetary Policy Including Decisions Related to Policy Rate, it is an operating tool Monetary Policy Transmission.

“Monetary Policy Decisions to Change Policy Rates Do however have implications for liquidity management, being the operational tool to carry out the policy changes. Without any direct guidance on liquidity management, “He said.

System liquidity was in deficit in January 2025 with network under the liquidity adjustment facility (LAF) Scaling a peak of Rs 3.1 Lakh Crore on January 23, 2025.

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However, as a result of a Slew of Measures Injecting Liquidity of About Rs 6.9 Lakh Crore, The System Liquidity Deficit Tapred DURING DURING DURURY-March 2025 and Further Turnto Surns 2 2 29, the Govern Said.

Mr. Malhotra further said that coupled with government spending picking up pace during the latter half of March, system liquidity furter furter improved and it studied at a surplus of Rs 1.5 lakh crus of 1.5 lakh crus on 7, 2025.

Reflecting these developments, He said the weight average call rate (WACR) Softened and Remained Near the Repo Rate Since the last policy meeting.

The spreads of three-month cp and three-month cd rates over 91-day treasury bill rate have also also a softtened since the second hour the second half of March, suggesting improvement in Liquidity Conditions.

The governor said the reserve bank is committed to provide SUFFICINENT System Liquidity.

The RBI, he added, will continue to monitor the evolving liquidity and financial market conditions and proactively take approach to approprite measures to ensure adequate liquidity.