RBI Maintains Repo Rate at 6.5% and Projects 7.2% GDP Growth for FY25

The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has decided to keep the repo rate unchanged at 6.5%, while maintaining its forecast for India’s real GDP growth at 7.2% for FY25.

RBI Governor Shaktikanta Das noted that inflation is expected to rise moderately to 4.8% in the third quarter of this fiscal year, indicating that the path to moderation in inflation may be slow and uneven. “The inflation horse has been brought to the stable within the tolerance band, but we must be cautious about opening the gate,” he remarked during the MPC briefing.

Despite the recent 50 basis point rate cut by the US Federal Reserve, the RBI opted to hold rates steady, adjusting its stance from “withdrawal of accommodation” to “neutral.” Governor Das highlighted that the Indian rupee remains one of the least volatile currencies.

He also urged banks and non-banking financial companies (NBFCs) to focus on managing inoperative accounts, mule accounts, cybersecurity, and other critical issues.

Experts have praised the RBI’s decision to maintain the repo rate, noting that while expectations for a cut were in line with US trends, the RBI is prioritizing key indicators like domestic inflation and financial stability. This caution is particularly relevant given the decline in individual savings as a percentage of GDP, which poses potential risks to financial stability.

Suresh Darak, Founder of Bondbazaar, commented that recent global geopolitical developments have led to a spike in oil prices, which could further drive inflation and likely influenced the MPC’s decision to keep rates unchanged. In the past few weeks, the yields on 10-year benchmark government securities have increased by about 10 basis points due to these factors.

Experts suggest that if these global challenges are temporary, a rate cut may be possible in the next policy cycle.