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Informist, Friday, Jun. 6, 2025

 

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--RBI Malhotra: MPC voted to cut repo rate by 50 bps 
--RBI Malhotra: MPC voted to cut repo rate to 5.50% 
--RBI Malhotra: SDF rate adjusted to 5.25% 
--RBI Malhotra: MSF and Bank rate adjusted to 5.75% 
--RBI Malhotra: Policy stance changed to 'neutral' from 'accommodative' 
--RBI Policy: Minutes of Jun MPC meeting to be released on Jun 20 
--RBI Policy: Next MPC meeting to be held on Aug 4-6 
--RBI Policy: MPC member Bhattacharya voted for 25 bps repo rate cut

 

MUMBAI - The Reserve Bank of India's Monetary Policy Committee on Friday unexpectedly lowered the policy repo rate by 50 basis points to 5.50%, Governor Sanjay Malhotra said. The committee also changed the policy stance to 'neutral' from 'accommodative'.

 

The rate-setting panel's decision was a surprise. In an Informist poll of 14 economists and market participants, 13 had expected the MPC to lower the repo rate by 25 bps from 6.00%, while only State Bank of India projected a 50-bps cut.

 

The RBI also cut the cash reserve ratio by 100 bps to 3.00% of net demand and time liabilities, in four tranches.

 

This is the third consecutive meeting in which the MPC has lowered the repo rate. The committee started lowering interest rates in February with a 25-bps cut, followed by another 25-bps cut in April. Friday's decision brings the cumulative interest rate easing in 2025 to 100 bps.

 

The decision to lower the repo rate by 50 bps was not unanimous, as external member Saugata Bhattacharya voted for a 25-bps reduction in the key rate.

 

"The near-term and medium-term outlook now gives us the confidence of not only a durable alignment of headline inflation with the target of 4%, as exuded in the last meeting but also the belief that during the year, it is likely to undershoot the target at the margin," Malhotra said in his statement. "Growth, on the other hand, remains lower than our aspirations amidst challenging global environment and heightened uncertainty."

 

Malhotra said it was imperative to continue to stimulate domestic private consumption and investment through policy levers to step up the growth momentum. "This changed growth-inflation dynamics calls for not only continuing with the policy easing but also front-loading the rate cuts to support growth," he said. 

 

With the MPC reducing the repo rate by 100 bps in quick succession since February, there is limited space to support growth, Malhotra said. "Hence, the MPC also decided to change the stance from accommodative to neutral," he said. 

 

The RBI lowered its CPI inflation projection for the current fiscal year to 3.7% from 4.0%. The GDP growth forecast for FY26 was left unchanged at 6.5%.

 

"From here onwards, the MPC will be carefully assessing the incoming data and the evolving outlook to chart out the future course of monetary policy in order to strike the right growth-inflation balance," Malhotra said.

 

With the repo rate lowered to 5.50%, the Standing Deposit Facility rate comes down to 5.25%, while the Marginal Standing Facility and bank rate now stand at 5.75%. Minutes of the June MPC meeting will be published on Jun. 20. The next meeting of the MPC is scheduled for Aug 4-6.  End

 

Reported by Shubham Rana

Edited by Avishek Dutta

 

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