In its June 2025 monetary policy meeting, the Reserve Bank of India (RBI) announced a 50 basis points cut in the repo rate, bringing it down to 5.5 percent. This move, aimed at supporting economic growth, came amid global trade tensions and signs of softening inflation. The RBI also shifted its policy stance from ‘accommodative’ to ‘neutral’, indicating a more balanced approach moving forward.
RBI Governor Sanjay Malhotra said the rate cut is in line with efforts to support growth while inflation remains under control. He also confirmed that stress previously seen in the retail lending segment, including personal loans and credit card borrowings, has now eased. This was the third policy rate cut by the central bank in 2025, bringing the total reduction so far to 100 basis points.
Here are the full highlights from the RBI’s June 2025 Monetary Policy announcement:
- The repo rate has been cut by 50 basis points, now standing at 5.5%. Earlier in the year, the RBI had cut rates by 25 basis points each in February and April.
- The Monetary Policy Committee (MPC), consisting of three RBI members and three external experts, took the decision to further ease the monetary environment to boost demand.
- The RBI shifted its policy stance to ‘neutral’, moving away from its earlier ‘accommodative’ approach.
- The Cash Reserve Ratio (CRR) has also been reduced by 100 basis points of Net Demand and Time Liabilities (NDTL). This is expected to release ₹2.5 lakh crore of liquidity into the banking system, thereby supporting credit growth and transmission of monetary policy.
- Inflation outlook has significantly improved:
- The FY26 Consumer Price Index (CPI) inflation forecast has been revised down to 3.7%, from 4% earlier.
- The April-June FY26 CPI inflation projection is also lowered to 2.9%, from the earlier estimate of 3.6%.
- The RBI retained its FY26 GDP growth forecast at 6.5%, indicating confidence in India’s economic resilience. The quarterly breakdown is as follows:
- April-June: 6.5%
- July-September: 6.7%
- October-December: 6.6%
- January-March: 6.3%
- RBI Governor Sanjay Malhotra said core inflation remains benign, and the last mile of disinflation is proving more challenging due to global uncertainties and tighter trade-offs between growth and inflation.
- He also mentioned that there is overall stability on all three fronts — price, financial, and political — giving confidence in the central bank’s macroeconomic management.
- The stress seen earlier in the unsecured retail lending space, including credit cards and personal loans, has now come down, which is a positive sign for lenders.
- On demand outlook, Malhotra said urban demand is improving, led by services activity, while rural demand remains steady.
Experts believe that this aggressive rate cut, combined with a neutral policy stance, could help revive consumption and private investment. Sectors like banking, real estate, auto, and consumer discretionary are expected to benefit the most in the coming quarters.
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Source: Moneycontrol
News Desk
