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| Photo Credit: The Hindu

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The rupee recovered 15 paise from its all-time low closing level to 87.44 (provisional) against the U.S. dollar on Friday (February 7, 2025) after the Reserve Bank of India reduced repo rate by 25 basis points in line with street expectations.

The Monetary Policy Committee (MPC), headed by RBI Governor Sanjay Malhotra, slashed the repo rate by 25 basis points to 6.25%. This was the first reduction since May 2020 and the first revision after two-and-a-half years.

At the interbank foreign exchange, the rupee opened at 87.57, touched an intra-day high of 87.33 and a low of 87.57 against the greenback during the session.

The local unit finally settled for the day at 87.44 (provisional) against the US dollar, registering a rise of 15 paise over its previous close.

On Thursday, the rupee plunged 16 paise to close at an all-time low of 87.59 against the US dollar.

“We expect the rupee to trade with a negative bias amid weak domestic markets and dollar demand from importers. Risk aversion in global markets amid ongoing uncertainty over US trade tariffs may also weigh on the rupee,” said Anuj Choudhary — Research Analyst at Mirae Asset Sharekhan.

The RBI cut repo rate by 25 bps to 6.25 per cent from 6.5 per cent, was in line with street expectations, Choudhary said, adding, “Thus, markets did not react too sharply.” Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading 0.04 per cent lower at 107.64.

Brent crude, the global oil benchmark, rose 0.90 per cent to USD 74.96 per barrel in futures trade.

Reserve Bank Governor Sanjay Malhotra on Friday said the exchange rate policy has remained consistent over the years and the central bank does not target any “specific level or band” of the rupee, which slipped to an all-time low of 87.59 against the US dollar on Thursday.

The governor further noted that the exchange rate policy has remained consistent over the years and the central bank does not target any “specific level or band” of the rupee.

“We should not be looking at day-to-day volatility in rupee”, but focus on long-term exchange rate, he said.

Malhotra added that the RBI was committed to taking carefully calibrated monetary policy decisions to facilitate conducive macroeconomic conditions that reinforce price stability, sustained economic growth and financial stability.

The local unit has lost over 2 per cent so far this year. The sharp drop in the domestic unit comes after nearly a 3 per cent fall in the USD/INR pair in 2024, making it one of the worst-performing Asian currencies.

On January 1, 2024, the rupee was at 83.21 against the greenback.

The rupee has lost 180 paise so far this year. The domestic unit was quoted at 85.64 against the greenback on January 1, 2025.

Forex traders said the rupee is trading with a negative bias over the global trade war as market participants mulled the impact of tariffs being imposed by the US and China.

In the domestic equity market, the 30-share BSE Sensex settled 197.97 points, or 0.25 per cent, lower at 77,860.19 points, while the Nifty was down 43.40 points, or 0.18 per cent, at 23,559.95 points.

Foreign institutional investors (FIIs) offloaded equities worth Rs 3,549.95 crore in the capital markets on a net basis on Thursday, according to exchange data.

The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5%.
| Photo Credit: Reuters

India Inc. welcomed the Reserve Bank of India’s (RBI) move to slash the benchmark interest rate for the first time in nearly five years on Friday (February 7, 2025) and asserted that it will complement the consumption-boosting measures announced in the last week’s Budget, providing much-needed support to the economy.

Industry bodies were of the view that the Reserve Bank’s 25 basis points rate cut to 6.25%, which comes after the last rate reduction in May 2020, sets the stage for further easing of interest rates over the near term. The last revision of rates happened in February 2023 when the policy rate was hiked by 25 basis points to 6.5%.

“This calibrated approach by the Central Bank reflects a careful balance between fostering economic growth and maintaining financial stability. The rate cut is anticipated to complement the consumption-boosting measures announced in the Union Budget 2025-26, providing a boost to domestic demand drivers,” Chandrajit Banerjee, Director General at CII, said.

“We believe that the easing inflation trend and non-inflationary fiscal policy have provided the RBI with the opportunity to continue its rate cut cycle and implement a larger rate cut once financial conditions become favourable,” he said.

FICCI president Harsha Vardhan Agarwal welcomes RBI’s decision to cut the repo rate by 25 basis points and said the move will provide much-needed support to the economy at this juncture.

He termed the RBI’s decision to ease the policy rate as a timely and forward-looking step, hoping that the banking sector would follow through on this cue and a lowering of lending rates would be seen.

“Further, while RBI has maintained a neutral stance with regard to Monetary Policy, the indication towards a more flexible interpretation of inflation targeting sets the stage for further rate cuts over the near term,” Mr. Agarwal added.

“The Budget has laid a strong foundation for investment-led growth emphasising manufacturing, MSMEs (micro, small and medium enterprises) and infrastructure. The rate cut complements these measures, lending further support to India’s growth outlook,” the FICCI President observed.

Hemant Jain, president, PHDCCI, stated that the reduction in the repo rate will lead to increased investment, higher consumer spending, enhanced production and accelerated overall economic growth.

Forex traders said an overall decline in the U.S. dollar and crude oil prices supported the rupee. However, weak domestic markets capped sharp gains. File
| Photo Credit: The Hindu

The rupee settled on a flat note and appreciated by just 1 paisa to close at 84.70 (provisional) against the U.S. dollar on Friday (December 6, 2024), as the Reserve Bank of India left the repo rate unchanged at 6.5% in its monetary policy decision.

The Reserve Bank of India on Friday (December 6, 2024) kept its key interest rate unchanged, citing inflation risks, but cut the Cash Reserve Ratio that banks are required to park with the central bank, boosting money with lenders to support a slowing economy.

Forex traders said an overall decline in the U.S. dollar and crude oil prices supported the rupee. However, weak domestic markets capped sharp gains.

At the interbank foreign exchange, the rupee opened at 84.66 and touched an intraday high of 84.53 and a low of 84.70 against the greenback.

On Thursday (December 5, 2024), the rupee recovered from its all-time low level and settled for the day with gains of 4 paise at 84.71 against the U.S. dollar.

“We expect the rupee to trade with a slight negative bias as the RBI lowered India’s GDP growth for FY25 to 6.6% from 7.2% in its previous projections,” said Anuj Choudhary, Research Analyst at Mirae Asset Sharekhan.

RBI lowered its growth forecast for the year ending March 2025 to 6.6% from its earlier projection of 7.2%.

RBI Governor Shaktikanta Das, however, said the GDP slowdown bottomed out in the July-September quarter and has seen a pick-up in subsequent months due to festival spending and strong agriculture output.

Mr. Choudhary further noted that the demand for the U.S. dollar may also keep the rupee under pressure.

However, weakness in crude oil prices and fresh foreign fund inflows may support the rupee at lower levels.

“Any intervention by the RBI may also support the rupee. Traders may take cues from non-farm payroll reports from the U.S. The USD-INR spot price is expected to trade in a range of 84.45 to 84.95,” Mr. Choudhary said.

Moreover, the Reserve Bank on Friday (December 6, 2024) announced a raise in the interest rate caps on the diaspora’s foreign currency deposits, in a move aimed at attracting more capital flows amid pressures on the rupee.

Announcing the fifth bi-monthly monetary policy for the current financial year, Mr. Das said it has been decided to increase the interest rate ceilings on Foreign Currency Non-Resident Bank deposits, or FCNR (B) deposits, as per tenors.

Meanwhile, the dollar index, which gauges the greenback’s strength against a basket of six currencies, was trading higher by 0.13% at 105.85.

Brent crude, the global oil benchmark, fell by 0.33% to $71.85 per barrel in futures trade.

On the domestic equity market front, the 30-share benchmark index Sensex closed 56.74 points, or 0.07% lower, to 81,709.12 points. The Nifty fell 30.60 points, or 0.12%, to 24,677.80 points.

Foreign Institutional Investors (FIIs) were net buyers in the capital markets on Thursday (December 5, 2024), as they purchased shares worth ₹8,539.91 crore, according to exchange data.

Security Personnel passes by a logo of Reserve Bank of India outside RBI Headquarters in Mumbai on December 6, 2024.
| Photo Credit: Emmanual Yogini

The Reserve Bank on Friday (December 6, 2024) proposed to allow small finance banks to extend pre-sanctioned credit lines through Unified Payments Interface (UPI).

UPI is an instant real-time payment system developed by NPCI for transactions through mobile phones.

In September 2023, the scope of UPI was expanded by enabling pre-sanctioned credit lines to be linked through UPI and used as a funding account by commercial banks excluding Payments Banks, Small Finance Banks (SFBs) and Regional Rural Banks.

Also read: RBI Monetary Policy Committee meeting: policy rate unchanged at 6.5% for 11th time in a row  

Credit line on UPI has the potential to make available low-ticket, low-tenor products to “new-to-credit” customers, RBI Governor Shaktikanta Das said.

SFBs leverage a high-tech, low-cost model to reach the last-mile customer and can play an enabling role in expanding the reach of credit on UPI, he said.

“It is, therefore, proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI. Necessary guidelines will be issued shortly,” he said while unveiling the latest bi-monthly monetary policy.

The Governor also said that the Reserve Bank has been deploying traditional as well as new-age communication techniques as a key part of its toolkit to ensure transparency and greater impact of its decisions, explain the rationale behind its decisions, and disseminate various awareness messages to a wider audience.

The Reserve Bank has been expanding the scope of its public awareness activities including through social media over the last few years.

In continuation of this endeavour, the Reserve Bank proposes to launch podcasts for wider dissemination of information that is of interest to the general public, Mr. Das said.

Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy statement, Friday, Dec. 6, 2024.
| Photo Credit: PTI

The Reserve Bank of India raised India’s Consumer Price Inflation outlook for 2024-25 to 4.8% from 4.5%, with Q3 at 5.7% and Q4 at 4.5%. Going into FY 2025-26, the RBI projected Q1 inflation at 4.6% and Q2 at 4%.

Inflation increased sharply in September and October, led by an unanticipated increase in food prices. Core inflation, though at subdued levels, also registered a pick-up in October, the Reserve Bank of India Governor Shaktikanta Das said on Friday (December 6, 2024).

In the near term, despite some softening, lingering food price pressures are likely to keep headline inflation elevated in the third quarter — October to December, Mr. Das said. The near term inflation and growth outcomes in India have turned somewhat adverse since the last Monetary Policy Review, Mr. Das noted.

Manufacturing and services firms surveyed by the Reserve Bank point to hardening input costs and hikes in selling prices in Q4 of 2024-25 — January to March.

The RBI’s Monetary Policy Committee (MPC) on Friday (December 6, 2024) decided to keep the policy repo rate unchanged at 6.50% for the 11th consecutive time.

The RBI cited the favourable agricultural crop outlook which could ease food inflation pressures, subject to weather risks. File photo
| Photo Credit: REUTERS

The Reserve Bank of India (RBI) has projected India’s real GDP growth for FY25 at 7.2 per cent, while CPI inflation for the fiscal year is expected to moderate to 4.5 per cent, post Monetary Policy Committee (MPC) meeting on Wednesday (October 9, 2024).

Also read:Account verification facility for NEFT, RTGS soon: RBI

Mr. Das said, “Real GDP growth for 2024-25 is projected at 7.2 per cent. With Q2 at 7 per cent, Q3 at 7.4 per cent and Q4 7.4 per cent. Real GDP growth for Q1 of next financial year that is 2025-26 is projected at 7.3 per cent and the risks are evenly balanced.

According to RBI Governor Shaktikanta Das, growth for the fiscal year will be supported by robust quarterly performances.

However, Inflation in the third quarter is forecasted a little higher at 4.8 per cent, with further moderation anticipated in the fourth quarter when the kharif harvest comes.

However, RBI cautioned that the agricultural output remains susceptible to weather-related shocks, which could influence inflationary trends.

In contrast of India’s Gross Domestic Product (GDP) growth for the first quarter of FY25, Mr. Das said, “Real GDP grew by 6.7 per cent in the first quarter of this financial year, that is, 2024-2025, and this was led by a revival in private consumption and improvement in investment. The share of investment in GDP reached its highest level since 2012-2013. Government expenditure, on the other hand, contracted during the first quarter.”

“On the supply side, gross value added, that is, GVA, expanded by 6.8 per cent, surpassing the GDP growth, aided by strong industrial and services sector activities. High-frequency indicators available so far suggest that domestic economic activity continues to be steady,” Mr. Das added.

On the liquidity front, surplus conditions prevailed in August, September, and early October, though liquidity levels shifted back in late September. However, the agriculture and services sectors remained strong, and government consumption showed signs of improvement. Private investment intentions are also improving, reflecting growing confidence in the economy. Mr. Das said, “MPC noted that currently, the macroeconomic parameters of inflation and growth are well balanced.

The Reserve Bank of India’s Monetary Policy Committee (MPC) wrapped up its three-day deliberations today, deciding to maintain the repo rate at 6.5 per cent for the fourth consecutive time this fiscal year and the tenth time overall. Despite global market movements and the US Federal Reserve’s recent 50-basis-point rate cut, RBI Governor Shaktikanta Das confirmed the decision to keep the rate unchanged. 

The repo rate is the interest rate at which the RBI lends money to commercial banks. Changes in this rate directly influence the interest rates on loans and deposits offered by banks. A stable repo rate often translates to predictable EMI (Equated Monthly Instalment) payments for borrowers.

Impact on loan EMIs

• Home Loans: For individuals with floating interest rates on home loans, the unchanged repo rate means that EMIs will likely remain stable in the near term. Borrowers can breathe a sigh of relief as there won’t be immediate pressure to adjust their monthly payments. 
• Personal and Auto Loans: Similar to home loans, personal and auto loans linked to the repo rate will also see no immediate changes in EMIs. This stability can help borrowers manage their finances more effectively without the fear of sudden increases.
• Fixed-Rate Loans: For borrowers with fixed-rate loans, the impact of the repo rate remains minimal in the short term.

Key outcomes of the meeting

• The MPC decided to keep the repo rate steady at 6.5 per cent, with a majority of 5 out of 6 members supporting this decision.
• The real GDP growth rate for FY25 is projected at 7.2 per cent.
• RBI Governor Shaktikanta Das mentioned that food inflation pressures may ease due to favourable conditions from the kharif sowing season and good soil moisture.
• Change in Policy Stance: The MPC changed its policy stance from ‘withdrawal of accommodation’ to ‘neutral.’
• The committee noted weaker corporate profitability and government expenditure as factors influencing the growth outlook, leading to a downward revision of growth expectations for the June quarter from 7.3 per cent to 7.1 per cent.
• Governor Das highlighted downside risks to the economy, including geopolitical tensions, particularly in West Asia and financial market volatility.
• The MPC’s discussions included expectations for inflation to remain moderate but acknowledged that moderation might be “slow and uneven”.

Reserve Bank of India (RBI) Governor Shaktikanta Das delivers the Monetary Policy statement, in Mumbai. File photo
| Photo Credit: PTI

 The Reserve Bank of India’s Monetary Policy Committee (MPC) on Wednesday (October 9, 2024) decided to keep the policy repo rate unchanged at 6.50% for the 10th consecutive time.

Of the six members of the MPC, five voted in favour of the decision, which is aimed at taming inflation.

Governor Shaktikanta Das announced the central bank’s decision on policy rates in the RBI’s concluding day Monetary Policy Committee (MPC) meeting on Wednesday. “The Flexible monitory policy framework has completed 8 years. This is major structural reform, “ Mr. Das said in a statement.

The RBI changes stance of monetary policy to ‘neutral’ from withdrawal of accomodation, Mr. Das said. In the backdrop of a good monsoon and adequate buffer stock, the food inflation will fall later in the year, Mr. Das said.

The meeting, which began on October 7, has garnered significant attention, as the RBI has maintained the repo rate at 6.50% for the past nine consecutive meetings, adopting a cautious stance to balance inflationary concerns with the need for economic growth.

Earlier on August 8, 2024, in its first meeting after the Union Budget, the RBI’s Monetary Policy Committee (MPC) kept the policy repo rate unchanged at 6.50% for the ninth consecutive time.

(With inputs from agencies)