The monetary policy committee of the Indian central bank has unanimously agreed to reduce the key interest rate by 25 basis points, the first reduction in nearly five years.

This was reported by Bloomberg.

Since December 2024, India has a new central bank governor, Sanjay Malhotra. Under his leadership, the regulator has opted to ease the country's monetary policy, the first such change since 2020.

This move was anticipated by most economists. Malhotra noted that this less restrictive policy applies only to this meeting and does not necessarily indicate future actions.

The committee also decided to maintain a neutral monetary policy while focusing on achieving inflation targets.

The central bank assured that it will remain flexible in providing liquidity, allowing banks more time to comply with the new liquidity coverage ratio.

Markets were disappointed by the unchanged monetary policy and the lack of new liquidity measures. The yield on 10-year bonds rose by 5 basis points to 6.71%. Stocks were volatile, with the NSE Nifty 50 index falling by 0.2%. The rupee strengthened against the dollar.

The central bank predicts slightly faster GDP growth and slower inflation in the financial year starting April 1.

Reminder:

India has lifted import duties on certain components critical for mobile phone manufacturing, encouraging local production.