RBI is scheduled to hold its next monetary policy committee meeting from April 7 to April 9 in Mumbai
Mumbai: The next meeting of the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) is scheduled to take place in Mumbai from Monday, April 7, to Wednesday, April 9.
Reviewing the state of the economy and determining the policy rates will be the main agenda items for the meeting. On April 9 at 10 AM, RBI Governor Sanjay Malhotra will make the announcement of the meeting’s result, including any modifications to the main policy rates.
The MPC unanimously agreed to lower the policy repo rate by 25 basis points, from 6.5 percent to 6.25%, in its most recent monetary policy statement on February 7. In the current easing cycle, this was the first rate reduction.
A further 25 basis point rate drop is anticipated in the April 2025 policy, according to a study released by the State Bank of India (SBI).
Throughout the cycle, the research predicts a cumulative rate drop of at least 100 basis points. According to the report, the RBI would likely implement two consecutive rate cuts in February and April of 2025, halt in June, and then begin the following round of cuts in August of the same year.
The research did, however, issue a warning that banks may find it difficult to mobilize deposits during the period of rate lowering. Low tax-adjusted returns for savings and a total switch to the Just-In-Time (JIT) method are likely to make this problem worse.
“We anticipate a 25 basis point rate cut in the April 25 policy,” it said. Over the course of the cycle, the total rate reduction may be at least 100 basis points.
Therefore, mobilizing reliable and inexpensive deposits may be hit twice in the next months.
According to economists, a rate reduction is required to encourage economic expansion. While some want a 50 basis point (bps) cut, others anticipate a more cautious strategy.
According to Debopam Chaudhuri, Chief Economist of Piramal Group, the RBI needs to take a more accommodating approach. He emphasized that weak credit expansion and high borrowing rates contributed to the economic downturn in the second half of FY25. As a result, politicians need to act to alleviate these obstacles.
“It seems that a 50 basis point rate drop is urgently needed. that’s hard to say whether RBI will take that into consideration. The MPC may act quickly when all three of the main data trends—softer inflation, a manageable bank liquidity gap, and improving INR—support a rate-cut scenario, Chaudhuri said.
Sonal Badhan, an economist at Bank of Baroda, anticipates a more measured response from the RBI. She expects a rate lowering of 25 basis points in April, for a total of 75 basis points this cycle.
In addition to interest rates, Badhan pointed out that economic development, geopolitical threats, and patterns in international commerce all have an impact on capital movements. Because of India’s robust domestic economy, she anticipates an improvement in capital inflows in the next months.
“We anticipate the RBI reducing the repo rate by 25 basis points at its meeting on April 25,” she said. We have factored in a 75 basis point rate drop overall for this cycle. A 25 basis point drop is more plausible since the RBI is anticipated to reduce rates more gradually.
