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RBI’s Monetary Policy (April 09, 2025): In A Nutshell

The bi-monthly monetary policy of Reserve Bank of India (RBI) was announced on April 09, 2025. Here are some of the highlights of the monetary policy announcement.

Rates

 

ChangeRate
Policy repo rateReduced by 0.25%6.00%
Standing deposit facility (SDF) rate5.75%
Marginal standing facility (MSF) rate6.25%
Bank rate6.25%

Monetary policy stance

  • Monetary policy stance was changed from ‘neutral’ to ‘accommodative’.
  • Monetary policy stance –
    • Accommodative – entails easy monetary policy that is geared towards stimulating the economy through softer interest rates.
    • Tightening – refers to contractionary monetary policy whereby interest rates are hiked to restrain spending and curb economic activity, all with the objective of reining in inflation. 
    • Neutral – is typically associated with a state of economy which neither calls for stimulating economic activity nor calls for controlling inflation by curtailing demand and provides flexibility to move in either direction on the basis of evolving economic conditions.
  • Change in stance from ‘neutral’ to ‘accommodative’ means that going forward, absent any shocks, the Monetary Policy Committee (MPC) is considering only two options – status quo or a rate cut.
  • The stance should not be directly associated with liquidity conditions. The stance provides policy rate guidance, without any direct guidance on liquidity management. Monetary policy decisions to change policy rates do however have implications for liquidity management, being the operational tool to carry out the policy changes.

Domestic Economy 

  • Real Gross Domestic Product (GDP) is estimated to grow at 6.5% in 2024-25 and 2025-26.
  • Consumer Price Index (CPI) headline inflation declined from 5.2% in December 2024 to 3.6% in February 2025. Food inflation dropped to a 21-month low of 3.8% in February from 5.7% in January 2025.
  • CPI inflation for the year 2025-26 is projected at 4.0%.
  • As on 4th April, 2025, India’s foreign exchange reserves stood at 676.3 billion US dollars, providing an import cover of about 11 months.
  • India’s external debt to GDP ratio stood at 19.1% at end-December 2024 (18.5% at end-March 2024).
  • Average spread of Weighted Average Call Rate (WACR) over the policy repo rate was 6 bps during February-March 2025 compared to 13 bps during December-January.

Other measures

  • Securitisation of stressed assets will be enabled through market-based mechanism. This is in addition to the existing Asset Reconstruction Companies (ARC) route under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002.
  • The extant guidelines on co-lending are applicable only to arrangements between banks and Non-Banking Financial Companies (NBFCs) for priority sector loans. The scope for co-lending will be extended and a generic regulatory framework will be issued for all forms of co-lending arrangements among regulated entities (REs). 
  • Loans against the collateral of gold jewellery and ornaments, commonly known as gold loans, are extended by REs for both consumption and income-generation purposes. To harmonise guidelines across various types of REs, to the extent possible, keeping in view their differential risk-bearing capabilities, comprehensive regulations will be issued on prudential norms and conduct related aspects for such loans.
  • The guidelines covering Non-fund based (NFB) facilities like Guarantees, Letters of Credit, Co-Acceptances etc. across all REs will be harmonized and consolidated. This include a review of instructions on issuance of partial credit enhancement (PCE) by REs, with a view to, inter alia, broadening funding sources for infrastructure financing. 
  • At present, the transaction amount for Unified Payment Interface (UPI), covering both Person to Person (P2P) and Person to Merchant payments (P2M), is capped at ₹1 lakh except for specific use cases of P2M payments which have higher limits, some at ₹2 lakh and others at ₹5 lakh. National Payments Corporation of India (NPCI), in consultation with banks and other stakeholders of the UPI ecosystem, may announce and revise limits for P2M transactions. P2P transactions on UPI shall continue to be capped at ₹1 lakh, as hitherto. 
  • RBI has been operating the Regulatory Sandbox (RS) framework since 2019, and 4 specific thematic cohorts have been announced and completed till date. An ‘On Tap’ application facility for themes of closed cohorts was announced in October 2021. A 5th ‘Theme Neutral’ cohort was also announced in October 2023, which will close in May 2025. Under this cohort, any innovative product or solution within the regulatory ambit of RBI could be tested if found eligible. The RS will now be made ‘Theme Neutral’ and ‘On Tap’.


References

Reserve Bank of India. (2025, April 09). 'Governor’s Statement: April 9, 2025'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60177

Reserve Bank of India. (2025, April 09). 'Statement on Developmental and Regulatory Policies'. Retrieved from https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=60178


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