Repo Rate Cut Expected in April 2025: Liquidity Concerns
Why in the news
After the first repo cut in almost five years, analysts expected another in April, though tight liquidity could blunt its effect.
Key facts
- Repo rate: 6.25% after the February cut.
- Liquidity deficit: ₹1.09 trillion, 11 weeks running.
- Growth: GDP seen slowing to about 6% in FY25, versus 9% (revised) in FY24.
Why a cut is expected
- Softer inflation, especially food prices.
- Slowing growth needing support.
- MPC’s dovish bias leaves room to ease.
Views
| Institution | Expectation |
|---|---|
| DBS Bank | 25 bps in April; maybe an accommodative stance later |
| UBS | 50 bps in this cycle, plus interbank liquidity steps |
| HDFC Bank | Case for more cuts backed by moderate Q3 GDP growth |
Concerns
- Loans not linked to an external benchmark may not get cheaper.
- Some say liquidity needs priority; RBI may have to infuse funds.
Exam angle
- Repo rate: 6.25%.
- Related terms: liquidity deficit, transmission, dovish stance.