Reserve Bank of India (RBI) Governor Sanjay Malhotra will present the bi-monthly monetary policy statement on Friday at 10 am, with markets widely anticipating another reduction in the key policy rate to support economic growth amid global trade uncertainties.
The central bank’s Monetary Policy Committee (MPC), chaired by Governor Malhotra, began its three-day deliberations on Wednesday. This comes in the context of escalating trade tensions following new tariffs imposed by the United States under President Donald Trump, which have raised concerns about their potential impact on global economic activity.
Having already slashed the repo rate by 25 basis points (bps) in both February and April 2025, the RBI is now expected to announce a third consecutive rate cut. A majority of economists and financial analysts forecast a 25-bps cut this time as well. However, a recent report by the State Bank of India (SBI) suggests the possibility of a more aggressive 50-bps reduction, aimed at giving a stronger boost to domestic demand.
The repo rate, which is the interest rate at which the RBI lends to commercial banks, currently stands at 6.25%. A reduction in this rate typically leads banks to lower lending rates, which can ease borrowing costs for both households and businesses. This, in turn, could help stimulate investment and consumption.
An RBI assessment noted that banks have already begun passing on the benefits of earlier rate cuts by adjusting their external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rates (MCLRs) downward.
The MPC is composed of six members: three from the RBI and three appointed externally by the government. Apart from Governor Malhotra, the RBI is represented by Deputy Governor M Rajeshwar Rao and Executive Director Rajiv Ranjan. The external members include Nagesh Kumar, Director-General of the Institute for Studies in Industrial Development; economist Saugata Bhattacharya; and Professor Ram Singh, Director of the Delhi School of Economics.
The decision announced on Friday will be closely watched by investors, businesses, and policymakers, as it will offer cues on the RBI’s approach to managing inflation and growth amid an evolving global economic landscape.