The Reserve Bank of India (RBI), under new Governor Sanjay Malhotra, announced its first monetary policy of 2025, marking significant changes in rates and introducing new measures to enhance financial security and market access.
Key Highlights and Measures
Key Rate Changes and Economic Projections
i) Repo rate cut by 25 basis points to 6.25% (first rate cut in nearly five years)
ii) Standing Deposit Facility (SDF) rate adjusted to 6.00%
iii) Marginal Standing Facility (MSF) and Bank Rate set at 6.50%
iv) Monetary policy stance maintained as “neutral”
v) GDP growth projected at 6.7% for FY 2025-26 (quarterly breakup: Q1: 6.7%, Q2: 7.0%, Q3: 6.5%, Q4: 6.5%)
vi) CPI inflation forecast for FY 2025-26 at 4.2% (quarterly breakup: Q1: 4.5%, Q2: 4.0%, Q3: 3.8%, Q4: 4.2%)
Digital Security and Fraud Prevention Measures
i) Introduction of exclusive ‘.bank.in’ domain for Indian banks starting April 2025
ii) Future implementation of ‘.fin.in’ domain for non-bank financial entities
iii) Additional Factor Authentication (AFA) to be extended to international card-not-present transactions
iv) Enhanced cybersecurity measures to combat digital payment frauds
Financial Market Development Initiatives
i) Introduction of forward contracts in Government securities
ii) SEBI-registered non-bank brokers granted direct access to NDS-OM platform
iii) Working group established to review trading and settlement timings across market segments
iv) Report on market timing review expected by April 30, 2025
Economic Outlook and Growth Factors
Growth Drivers
i) Healthy agricultural outlook with favorable rabi crop prospects
ii) Expected recovery in industrial activity
iii) Tax relief measures in Union Budget 2025-26
iv) Improving employment conditions
v) Moderating inflation supporting consumption
External Sector
i) Foreign exchange reserves at $630.6 billion (as of January 31, 2025)
ii) Import cover exceeding 10 months
iii) Current Account Deficit expected to remain within sustainable levels
Market Access and Trading Reforms
Forward Contracts in Government Securities
i) Enables long-term investors to manage interest rate risks
ii) Facilitates efficient pricing of derivatives
iii) Benefits insurance funds and other institutional investors
NDS-OM Platform Access
i) Extended to SEBI-registered non-bank brokers
ii) Aims to increase retail participation in government securities
iii) Expected to deepen the bond market
Digital Security Framework
Enhanced Authentication Measures
i) Implementation of Additional Factor Authentication for international transactions
ii) Strengthened security protocols for cross-border digital payments
iii) Focus on reducing cyber threats and phishing attempts
Domain Security
i) ‘.bank.in’ domain to be implemented from April 2025
ii) Future rollout of ‘.fin.in’ domain for financial sector
iii) IDRBT to act as exclusive registrar
Industry Response
The policy announcements have been well-received by industry bodies, with organizations like CII and FICCI welcoming the rate cut and regulatory measures. The initiatives are expected to complement recent budget measures and support economic growth while maintaining financial stability.
Conclusion
The February 2025 monetary policy marks a significant shift in the RBI’s approach, balancing growth support with inflation control while strengthening the digital financial infrastructure. The combination of rate cuts and enhanced security measures reflects the central bank’s commitment to fostering sustainable economic growth while ensuring financial stability and security.