RBI MPC Meet 2025: RBI reduces repo rate by 50 bps to 5.5%; stance changed to Neutral

RBI Governor Sanjay Malhotra announced the decision on Friday, June 6, in his address to the media.

The MPC also decided to change the monetary policy stance to neutral from accommodative.

This was the third straight rate cut by the apex bank. While the majority of analysts had predicted the RBI to announce a 25 bps rate cut, there was a section of experts who believed that the apex bank may go for even a jumbo rate cut – a 50 bps reduction.

This is the lowest repo rate in three years.

The repo rate – the rate at which banks borrow funds from the RBI – had last stood at 5.40% on August 5, 2022.

The RBI governor, while announcing the policy, said that the Indian economy presents strength, stability and opportunity amid global concerns. Governor Sanjay Malhotra added that the Indian economy is growing at a very fast pace, and "we are making all efforts to grow even faster in our vision of Viksit Bharat."

The governor further said that the Indian economy offers immense opportunities to investors.

The governor added that after reducing the repo rate by 100 bps in quick succession, monetary policy is left with limited space to support growth.

In his address, Governor Malhotra said that the comfortable surplus liquidity situation has reinforced faster rate transmission.

Inflation Outlook

The governor announced that the inflation outlook for FY26 has been revised downwards to 3.7%, from 4% earlier. Governor Malhotra added that core inflation largely remains stable and contained; however, the bank needs to be watchful of weather-related uncertainties and tariff concerns.

FY26 GDP growth forecast remains intact at 6.5%

The governor said that the RBI has retained its GDP growth forecast for the current fiscal year (FY 25-26) at 6.5%. The governor added that geopolitical tensions and weather vagaries pose headwinds to the growth.

Big boost to liquidity: CRR cut by 100 bps

In a boost to liquidity, the MPC decided to reduce the cash reserve ratio (CRR) to 3% from 4% earlier – a 100 basis point reduction. The cash reserve ratio (CRR) is the percentage of total deposits a bank must have in cash to operate risk-free.

A reduction in CRR means more liquidity in the system. The RBI governor announced that the reduction will be done in a staggered manner.

This reduction in CRR will release ₹2.5 lakh crore of bank funds, the governor added.

With the reduction in four equal tranches ending November 29, 2025, the CRR would come down to 3%. This means that the commercial banks would have to maintain a lower level of 3% in liquid cash form, with the RBI allowing them to have higher funds for lending.

The last massive, similar CRR cut of 1% was done on March 27, 2020, when the RBI had also slashed the benchmark repo rate by 75 basis points in an off-policy decision to support amid the onslaught of the COVID-19 pandemic.

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