Sanjay Malhotra will chair the MPC meeting for the first time, when will the decision be taken; Will interest rates be cut?

New Delhi| The three-day meeting of the Monetary Policy Committee (MPC) of the Reserve Bank of India will begin on Wednesday 5 February. Sanjay Malhotra, the new Governor of the central bank, will preside over the meeting for the first time. The RBI Governor will announce the decisions taken on interest rates in the meeting on 07 February 2025 (Friday). According to experts, the market is eagerly waiting for a possible cut in interest rates. Media reports estimated a cut of 25 basis points. If this happens, the benchmark lending rate, that is, the repo rate, will decrease from the current 6.5 per cent to 6.25 per cent. New Governor Sanjay Malhotra will attend the MPC meeting for the first time since former Governor Shaktikanta Das’s term ended in December 2024. In the last MPC meeting that is December 2024, a decision was taken to cut the cash reserve ratio (CRR) by 50 basis points

Experts expect relief from the Monetary Policy Committee
After the budget, now all eyes are on the announcements of Reserve Bank of India regarding interest rates on 7 February 2025. Banks, experts and economists have expected that the Reserve Bank may give some relief in interest rates this time. The new Monetary Policy Committee (MPC) meeting to be held from February 5 to 7 under the chairmanship of Sanjay Malhotra, the new Governor of the Reserve Bank of India (RBI), is likely to cut interest rates. Experts expect the repo rate cut in the upcoming MPC or the benchmark lending rate set by the RBI to be reduced by 25 basis points (bps) from 6.5 per cent to 6.25 per cent. The MPC will announce its decision on the repo rate on 7 February.

There may be a deduction of 25 basis points: SBI Research
According to a State Bank of India research note, a rate cut of 25 basis points can be expected in the February 2025 policy. The cumulative rate deduction during this cycle may be at least 75 basis points. A second rate cut after February and April 2025 could begin in October 2025. The note said the Reserve Bank needs to rethink the liquidity framework, focus on monetary fiscal coordination.

Decision to cut repo rate may be postponed till April or June: ICRA
ICRA said in its note that data coming since the last MPC meeting shows that the second quarter of FY 2025 has been disappointing. At the same time, due to Gross Domestic Product (GDP) being lower than expected, the growth results are likely to be better in the third quarter of FY 2025. Good production in Kharif production and favorable trends for Rabi sowing indicate a strong agricultural year. Furthermore, most of the high frequency indicators related to the industrial and service sectors have seen their year-on-year growth rates accelerate in the third quarter compared to the second quarter of FY2025. All these signs are good for the Indian markets, while if the global developments are not good and the rupee has slipped to a lower level against the US dollar, then the start of reduction in policy rates i.e. interest rates will be postponed till April 2025 or June 2025. Can be postponed till the meetings.

Experts expect – there may be ways to boost consumption and demand
Experts say that if rates are cut at this time, consumption and demand in India will get a boost. The reduction in rates at this time by exempting taxpayers with income of Rs 12 lakh or less from income tax in the budget will help boost consumption demand emotionally. On the other hand, market experts say that the figures of industrial and service sectors have been good, while due to the tariff war in America and China, the rupee remains weak against the dollar. It is possible that this rate cut may be postponed till April or June. On the other hand, RBI had announced to inject Rs 1.5 lakh crore of cash into the banking system, and the Reserve Bank will also auction $5 billion of dollar-rupee buy and sell swaps for a period of six months.