All Eyes on April 9 MPC Decision Amid Growth and Liquidity Challenges

By siliconindia  |  Monday, 07 April 2025, 10:00:26 AM IST

All Eyes on April 9 MPC Decision Amid Growth and Liquidity Challenges
The Reserve Bank of India (RBI) will conduct its next Monetary Policy Committee (MPC) meeting from Monday, April 7, to Wednesday, April 9, in Mumbai.
The meeting will be centered on considering the prevailing economic conditions and determining the policy rates. RBI Governor Sanjay Malhotra will declare the result of the meeting, including any revision in the key policy rates, on April 9 at 10 AM.
In its February 7 monetary policy announcement, the MPC in an unanimous decision reduced the policy repo rate by 25 basis points to 6.25 per cent from 6.5 per cent. This was the first cut of the ongoing easing cycle.
There is likely to be a second 25-basis point cut in the April 2025 policy, a report by State Bank of India (SBI) has indicated.
The report expects at least a cumulative rate cut of 100 basis points over the cycle. It reported that RBI to follow two consecutive rate cuts in February and April 2025, to be followed by a pause in June, and the next set of cuts expected to resume from August 2025.
But the report also warned that mobilization of deposits by banks can become a challenge in the course of the rate-easing cycle. This will probably be exacerbated by low tax-adjusted returns to savers and a total transition towards the Just-In-Time (JIT) mechanism.
It stated, "We expect a 25-basis point rate cut in April'25 policy. The cumulative rate cut over the cycle could be at least 100 basis points".
Consequently, tapping low-cost and stable deposits may receive a double whammy in the next few months.
Economists think that the economy needs a rate cut to fuel growth. Some are calling for a 50-basis-point (bps) cut, while others anticipate a more conservative stance.
Piramal Group Chief Economist Debopam Chaudhuri feels that the RBI needs to turn more accommodative. He pointed out that economic slowdown towards the second half of FY25 was also attributable to high cost of borrowing and weak credit growth. Thus, policymakers need to take steps to remove these bottlenecks.
A 50 bps rate cut appears to be the call of the hour. Whether RBI will act upon it is tough to say. When all three big data trends, viz., softer inflation, contained bank liquidity deficit and firming INR provide a rate cut environment, the MPC could act quickly", Chaudhuri said.
But Sonal Badhan, Bank of Baroda's Economics Specialist, hopes for a more cautious RBI approach. She sees a 25 bps cut in April with an overall 75 bps reduction in the cycle.
Badhan noted that capital flows are influenced by multiple factors beyond interest rates, including economic growth, geopolitical risks, and global trade trends. She expects capital inflows to improve in the coming months due to India’s strong domestic economy.
She explained "We are expecting RBI to cut repo rate by 25bps in its Apr'25 meeting. Cumulatively we have priced 75bps rate cut in the cycle. We expect RBI to follow a more measured pace of rate cuts, therefore 25bps cut is more probable".

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