On April 9, 2025, the Reserve Bank of India (RBI) reduced the repo rate by 0.25% to 6%, offering relief to the general public.
This is the second consecutive cut after a similar reduction on February 7, 2025, when the rate was brought down from 6.5% to 6.25%. These are the first rate cuts since May 2020, marking a shift after two and a half years.
A lower repo rate means banks and financial institutions can borrow money from the RBI at a cheaper rate.
This usually leads to lower interest rates on home loans, car loans, and personal loans, which helps reduce monthly EMIs—a major benefit for the middle class.
The RBI also changed its monetary stance from ‘neutral’ to ‘accommodative’. This signals that more rate cuts may happen in the future, possibly leading to even lower EMIs.
Key Announcements from the RBI Monetary Policy Committee Meeting
UPI Transaction Limits Revised: The RBI allowed the National Payments Corporation of India (NPCI) to revise transaction limits for customer-to-merchant (P2M) UPI payments based on economic needs.
P2P (person-to-person) UPI limit remains ₹1 lakh.
For P2M transactions:
Capital market, insurance, etc.: ₹2 lakh
Tax payments, education, hospitals, IPOs: ₹5 lakh
GDP Forecast Revised: The GDP growth forecast for 2025-26 was lowered from 6.7% to 6.5%. Investment is expected to grow due to improved bank and company finances, higher infrastructure spending, and strong demand.
Inflation Forecast Lowered: The inflation forecast for 2025-26 was reduced from 4.2% to 4%, despite uncertainties from trade-related measures.
New Gold Loan Guidelines: RBI released draft rules for loans against gold ornaments and jewellery. The goal is not to tighten rules but to standardize lender practices, since such loans are used for both personal and business needs.
Co-Lending and Regulatory Framework: RBI proposed to expand co-lending between banks and NBFCs and plans to issue a common regulatory framework.
Securitisation of Stressed Assets: New draft guidelines for dealing with stressed loans were issued. This involves converting bad loans into marketable securities, helping banks reduce risk and recover money.
Upcoming MPC Meetings
The Monetary Policy Committee (MPC) will meet six times in the 2025-26 financial year.
The first meeting took place from April 7 to 9.
The next meeting is scheduled from June 4 to 6, 2025.
The detailed minutes of the 54th MPC meeting will be published on April 23, 2025.
