RBI MPC Meeting 2025: Will New Governor Sanjay Malhotra Cut Rates?

The Reserve Bank of India’s (RBI) bi-monthly monetary policy committee (MPC) meeting began on February 5, 2025. This is the first meeting being held after Sanjay Malhotra took over as RBI governor in December 2024.

Incidentally, this will be the last MPC meeting for the current financial year (FY2024-25). Malhotra will announce the decision taken at the 3-day MPC, on February 7, 2025. The RBI holds six meetings each year, every two months, to review the country’s monetary policy.

RBI MPC Meet Expectations: Will RBI Cut Key Lending Rates?

One of the key speculations around the MPC is whether the central bank will cut lending rates. Market analysts expect the RBI to cut rates in order to improve liquidity.

Last month, the RBI announced plans to inject Rs 1.5 lakh crore into the economy. In December 2024, the central bank also introduced Rs 1.16 lakh crore in liquidity by cutting the cash reserve ratio (CRR) by 50 basis points (bps). In its February 2025 meeting, the RBI is expected to announce more steps to ensure liquidity remains stable.

Morgan Stanley anticipates that the RBI will take steps to support growth in its upcoming monetary policy.

“Although growth was tracking a tad weaker than we expected in the December quarter, the trend in inflation is in line with our view alongside the Budget, which continued on a fiscal consolidation path. As such, domestic growth and inflation dynamics warrant easing and will likely outweigh the concern of volatility stemming from external factors in the policy on February 7. We thus expect the RBI to provide support through different levers to ease liquidity conditions, regulatory burdens, and policy rates. We expect the RBI to build on the measures announced previously to improve liquidity through a rate cut in the next policy preview,” Morgan Stanley said in a recent report

A combination of liquidity enhancement, rate cuts, and growth-supporting measures in the Budget will be crucial to driving economic growth, according to Murthy Nagarajan, head-fixed income, Tata Asset Management. “Specifically, we anticipate a 50 basis point cut in the CRR in the February MPC policy,” he says.

Adds V.K. Vijayakumar, chief investment strategist at Geojit Financial Services: “The RBI’s announcement of measures to boost the liquidity in the banking system by around Rs 1.5 lakh crore is positive for the market. This raises the prospects of a rate cut by the MPC in the February policy meeting.”

Incidentally, Union Minister of Finance Nirmala Sitharaman had in her Budget speech signalled that the government will continue on the path of fiscal consolidation with fiscal deficit target for FY26 pegged at 4.4 per cent of GDP as against 4.8 per cent in FY25.

“The Budget has pegged a fiscal consolidation path for F2026 at 4.4 per cent of GDP, a tad faster than our estimate of 4.5 per cent,” Morgan Stanley said.

“In addition, it pencils in a consolidation path for the central government's debt over the medium term, so as to reach 50 per cent (plus or minus 1%) of the GDP by F2031. A benign and stable trend in the macroeconomic environment forms the basis of a sustained growth trajectory, while fiscal pragmatism can help to ensure debt sustainability,” the report added.

Prabhakar Kudva, co-founder and Director, Samvitti Capital, says, “With this solid fiscal foundation, focus now shifts to the RBI and MPC for potential monetary easing and liquidity improvement measures.”