Reserve Bank of India (RBI) may cut repo rate by 25 basis points (bps) in April; total 75 bps reduction likely in FY26: India Ratings and Research (Ind-Ra)

The Reserve Bank of India (RBI) is anticipated to reduce the repo rate by 25 basis points (bps) in its policy review meeting in April, according to India Ratings and Research (Ind-Ra). This cut is expected to be part of a total reduction of 75 bps in FY26. Ind-Ra forecasts that headline inflation in FY25 will cool to 4.7%. However, if the impact of US reciprocal tariffs is higher than anticipated, the RBI may implement further easing. The RBI's monetary policy committee is scheduled to meet six times in FY26, with the first meeting set for April 7-9. The repo rate was increased by 250 bps between May 2022 and February 2023, reaching 6.5%, and was cut by 25 bps to 6.25% in February 2025. Ind-Ra expects headline retail inflation in the March quarter of FY25 to fall below 4% for the first time in 21 quarters. 

Ind-Ra anticipates a maximum of three rate cuts in FY26, aggregating to 75 bps, bringing the terminal repo rate to 5.5% and average inflation to around 4%, resulting in a real repo rate of 1.5% in FY26. The February 2025 MPC minutes suggest that the RBI knows the slowing growth momentum. While maintaining low and stable inflation remains the RBI's primary target, supporting growth through monetary policy will increasingly be a focus area. 

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.