The monetary policy committee of India's central bank has voted unanimously to lower the interest rate by 25 basis points, marking the first reduction in almost five years.

This was reported by Bloomberg.

Since December 2024, Sanjay Malhotra has taken over as the new head of the central bank. Under his leadership, the regulator decided to ease the country's monetary policy. The last such adjustment occurred in 2020.

This decision was anticipated by many economists. Malhotra indicated that the less restrictive policy applies only to this meeting and may not be extended to future sessions.

The committee also chose to maintain a neutral monetary policy, focusing on achieving inflation targets.

The central bank assured that it would remain flexible in providing liquidity, extending the timeline for banks to comply with the new liquidity coverage ratio.

The 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 showed volatility, with the NSE Nifty Index 50 falling by 0.2%. The rupee appreciated against the dollar.

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

Reminder:

India has abolished import duties on certain components essential for mobile phone manufacturing to boost local production.