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RBI Governor Sanjay Malhotra says the MPC felt frontloading of rate cut will boost growth; the RBI MPC changes its policy stance from ‘accommodative’ to ‘neutral’.
The RBI also reduced the SDF to 5.25 per cent, and MSF and Bank Rates to 5.75 per cent.
RBI Monetary Policy Committee Meeting June 2025: In a surprise move, the RBI’s Monetary Policy Committee (MPC) has decided to cut the key repo rate by 50 basis points (bps) to 5.5 per cent, RBI Governor Sanjay Malhotra announced on Friday. With this, the repo rate is at the lowest level in nearly three years.
The RBI also announced a surprise reduction in CRR by a significant 100 bps to 3 per cent, in four tranches of 25 bps each, beginning September 2025. It is expected to infuse Rs 2.5 lakh crore into the banking system in the coming months. A basis point is 100th of a percentage point.
Also Read: RBI Repo Rate Cut: Home, Personal Loans EMIs To Come Down; How Much Will You Save?
The repo rate is the interest rate at which the RBI lends money to commercial banks, while the cash reserve ratio (CRR) is the percentage of a bank’s total deposits that must be kept with the RBI as reserves in cash form.
The RBI also reduced the SDF to 5.25 per cent, and MSF and Bank Rates to 5.75 per cent. The SDF is the lower band of the interest rate corridor, while the MSF is the upper band.
Announcing the second bi-monthly monetary policy of FY26, the RBI governor said, “The MPC felt frontloading of rate cut will boost growth.”
The RBI governor said that after reducing repo by 100 bps in quick succession, monetary policy is left with limited space to support growth.
Most analysts had expected a 25-basis-point cut in repo rate. However, State Bank of India (SBI) had said the RBI MPC may go for a ‘jumbo rate cut’ of 50 bps to reinvigorate the credit cycle and counterbalance uncertainties.
The RBI in the two previous monetary policy reviews reduced the repo rate by 25 bps each in February and April. Before that, the RBI had also cut the CRR by 50 bps to 4 per cent in December 2024.
Stance Changed From ‘Accommodative’ to ‘Neutral’
He also said the MPC has changed its policy stance from ‘accommodative’ to ‘neutral’.
“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,” Malhotra said.
How Will The ‘Jumbo Rate Cut’ Affect You?
The latest rate cut by the RBI is expected to provide relief to borrowers, both new and existing ones. It means that existing customers will see a decrease in their EMIs, and new borrowers will soon find home loans, auto loans, and personal loans more affordable.
FY26 CPI Inflation Projection Cut To 3.7%
The RBI on Friday also revised downwards the CPI inflation forecast to 3.7 per cent for FY26, from the 4 per cent projected earlier.
The RBI governor said there is stability in the front of price, financials and oil.
“Core inflation largely remains stable, contained. We need to be watchful of weather-related uncertainties and tariff concerns,” Malhotra said.
FY26 GDP Growth Forecast Maintained At 6.5%
The RBI maintained its FY26 GDP forecast at 6.5 per cent.
“The Indian economy is growing at a very fast pace and we are making all efforts to grow even faster in our vision of the Viksit Bharat,” the RBI governor stated.
He also said the Indian economy presents strength, stability and opportunity amid global concerns. The country offers immense opportunities to investors.
Malhotra said the RBI has retained GDP growth forecast for current fiscal at 6.5 per cent but geopolitical tensions and weather vagaries pose headwinds.
On the outlook, he said the government’s continued thrust on capital expenditure (capex) should help revive investment activity.
Forex Reserves At $691.5 Billion
The RBI governor said forex reserves currently stand at $691.5 billion, which is sufficient to fund more than 11 months of import needs, and the external sector remains resilient.
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso…Read More
Haris is Deputy News Editor (Business) at news18.com. He writes on various issues related to markets, economy and companies. Having a decade of experience in financial journalism, Haris has been previously asso… Read More
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