On June 6, the RBI cut the repo rate by 50 basis points, responding to slower growth and cooling inflation.
RBI Cuts Repo Rate by 50 bps to 5.50%
The Reserve Bank of India (RBI) surprised many by cutting the repo rate by 50 basis points on Friday, June 6, lowering it to 5.50%. This marks the third straight rate cut this year by the six-member Monetary Policy Committee (MPC) led by Governor Sanjay Malhotra.
So far in 2025, the RBI has reduced rates by a total of 100 basis points to help support the economy amid global challenges like trade tensions.
Earlier, the RBI cut rates by 25 basis points in February and again in April, which were its first cuts since May 2020.
RBI MPC Meeting: 5 key takeaways
Here are five important points from the RBI MPC’s June meeting:
1. Bigger Rate Cut and Stance Change
Slowing inflation allowed the RBI MPC to cut rates for the third time, with a bigger-than-expected 50 bps cut in the repo rate. As a result, the standing deposit facility (SDF) rate is now 5.25%, and both the marginal standing facility (MSF) rate and the Bank Rate are at 5.75%.
Governor Malhotra noted that after cutting rates by 100 bps quickly, there’s limited room left to boost growth.
The MPC also changed its stance from ‘accommodative’ to ‘neutral.’ Going forward, the MPC will closely watch income data and economic outlook before making future decisions.
2. Inflation Forecast Lowered
RBI Governor Sanjay Malhotra expressed confidence in inflation staying low and reduced the overall CPI forecast for FY 2024-26 to 3.7% from 4%.
Quarterly inflation projections were adjusted: Q1 FY26 was raised to 3.9% (from 3.6%), Q2 lowered to 3.4% (from 3.9%), Q3 slightly up to 3.9% (from 3.8%), and Q4 increased to 4.4% (from 4.2%).
3. Growth Outlook Steady
The RBI kept its real GDP growth forecast unchanged at 6.5% for FY26. Quarterly growth estimates are: Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6%, and Q4 at 6.3%.
Despite global challenges, India’s economy showed resilience with 7.4% growth in Jan-Mar. However, Governor Malhotra noted that growth is still below expectations due to global uncertainties.
4. Massive CRR Cut
The RBI unexpectedly lowered the cash reserve ratio (CRR) by 100 basis points to 3%, effective in four equal steps from September to November. This move will free up ₹2.5 lakh crore in the banking system.
Governor Malhotra said the cut will provide lasting liquidity and reduce banks’ funding costs, helping improve the flow of credit.
(The CRR is the portion of deposits banks must keep as cash.)
5. Stress in Unsecured Loans Declines
Governor Malhotra noted that stress in unsecured personal loans and credit card portfolios has eased. However, concerns remain in the micro-finance sector.
He added that banks and NBFCs in these areas are adjusting their business models, improving credit checks, and boosting collections to prevent risks from rising again.
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