RBI to cut rates again? All eyes on central bank as it will commence FY26's first MPC meet

The Reserve Bank of India's rate-setting panel is set to take its first monetary policy decision of the financial year in a review meetings starting Monday, amid a significant moderation in headline inflation over recent months.

A Reuters poll of economists forecasts a 25 basis point cut in rates at the meeting.

The RBI typically conducts six bimonthly meetings in a financial year, where it deliberates interest rates, money supply, inflation outlook, and various macroeconomic indicators. The other five meetings are scheduled for June 4-6, August 5-7, September 29-October 1, December 3-5, and February 4-6.


In the previous MPC meeting on February 7, the Reserve Bank of India (RBI) had unanimously decided to reduce the policy rate by 25 basis points (bps) from 6.5 per cent to 6.25 per cent. This was the first rate cut in about 5 years.

The repo rate is the rate of interest at which the RBI lends to other banks.

New Deputy Governor to vote for more cuts?

India’s appointment of Poonam Gupta, a former World Bank economist who has advocated for lower interest rates in the past, boosts the case for monetary policy easing in Asia’s third-largest economy, analysts said.

Gupta becomes the RBI’s first woman deputy governor in over a decade and will likely join the monetary policy committee, which cut interest rates for the first time in five years in February under new Governor Sanjay Malhotra.

Bloomberg quoting the economists expect more rate cuts next week as Malhotra pivots to a more growth-friendly approach than his predecessor, Shaktikanta Das. Gupta’s previous work has bolstered their hopes further.

A well-known economist and government adviser, Gupta worked for nearly two decades at the World Bank and the International Monetary Fund. She succeeds Michael Patra, who was head of the monetary policy department at the RBI and who retired in January.

In an opinion piece published in The Economic Times after the last policy decision, Gupta had called the earlier repo rate of 6.5% “unjustifiably high” at a time when growth is slow. The South Asian economy expanded at its weakest pace since the pandemic in the last fiscal and is forecast to grow at 6.3% to 6.8% for the current financial year. The “RBI needs to strengthen all its functions to become the central bank” of a developed India, she wrote.

Key announcements from last MPC meet:

The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI), under the leadership of new Governor Sanjay Malhotra, announced a 25 basis point reduction in the repo rate, lowering it to 6.25%.

Malhotra revealed that the committee unanimously decided to maintain a neutral stance, a shift made in October of the previous year, indicating a flexibility to adjust policy rates in response to the evolving economic environment.

Additionally, the December policy included a 50 basis point reduction in the Cash Reserve Ratio (CRR), bringing it down to 4%, aimed at enhancing liquidity and supporting credit growth.

For the financial year 2024-25, the RBI has projected India’s real GDP growth at 7.2%, while the Economic Survey forecasts a 6.4% growth, in line with the National Statistical Office (NSO) estimate.