RBI Gears Up for Crucial Rate Cut Debate Amid Economic Slowdown

The Reserve Bank of India (RBI) will convene its Monetary Policy Committee (MPC) meeting from April 7-9 to discuss economic conditions and policy rates. Analysts anticipate a 25 basis point rate cut, marking continued monetary easing. RBI Governor Sanjay Malhotra will announce the decision on April 9.

The Reserve Bank of India (RBI) is preparing for its upcoming Monetary Policy Committee (MPC) meeting, scheduled to be held in Mumbai from April 7 to April 9. The primary objective of the meeting will be to evaluate the current state of the economy and decide on adjustments to the policy rates, with Governor Sanjay Malhotra set to reveal the outcomes on April 9 at 10 AM.

In February, the MPC made a unanimous decision to lower the policy repo rate by 25 basis points, bringing it down to 6.25 percent. As part of this ongoing monetary easing cycle, analysts expect another 25-basis-point rate cut in April. According to a State Bank of India report, a cumulative rate cut of at least 100 basis points is anticipated, with two rate reductions predicted for February and April 2025, a pause in June, and further cuts potentially resuming in August. However, challenges such as deposit mobilization by banks could arise during this policy phase.

Economists emphasize the necessity of rate cuts to bolster economic growth, with some advocating a more aggressive 50-basis-point reduction. Debopam Chaudhuri, Chief Economist at Piramal Group, suggests a more accommodative approach to address high borrowing costs and slow credit growth. Conversely, Sonal Badhan from Bank of Baroda expects a more gradual reduction, forecasting a total cut of 75 basis points in this cycle, citing external factors also influencing capital flows.

(With inputs from agencies.)