5 Major Highlights from the RBI Monetary Policy Announcement: Stance Shift and Other Key Updates
RBI reduces repo rate by 50 basis points to 5.5% and shifts monetary policy stance to neutral
The Reserve Bank of India (RBI) has announced a 50 basis points cut in the repo rate, lowering it to 5.5%. This move marks the third consecutive rate cut of the year, totaling 100 bps since February 2025. RBI Governor Sanjay Malhotra revealed key decisions from the three-day Monetary Policy Committee (MPC) meeting that commenced on June 4 and ended today.
Highlights of the announcement
1. Repo rate slashed by 50 bps: The repo rate under the liquidity adjustment facility (LAF) has been reduced from 6.0% to 5.5%. The Standing Deposit Facility (SDF) rate is now at 5.25%, while the Marginal Standing Facility (MSF) rate and the Bank Rate are set at 5.75%.
2. MPC changes stance to neutral: With a cumulative rate cut of 100 bps since February, the six-member MPC has transitioned its monetary policy stance from “accommodative” to “neutral”. This indicates a more balanced approach, with future policy decisions contingent on economic data.
3. CRR cut to boost liquidity: The RBI has announced a 100 bps reduction in the Cash Reserve Ratio (CRR), from 4% to 3% of net demand and time liabilities (NDTL). This phased reduction is expected to inject about Rs 2.5 lakh crore of primary liquidity into the banking system by the end of November 2025.
4. Inflation forecast revised downwards: Reflecting easing trends in food and core inflation, the RBI has revised its inflation outlook for FY26 to 3.7%, below its comfort zone of 4%. The retail inflation rate had dipped to 3.16% in April.
5. GDP growth projection at 6.5%: For the financial year 2025-26, the RBI anticipates real GDP growth to be 6.5%. Quarterly growth rates are forecasted to be 6.5% in Q1 (April-June), 6.7% in Q2 (July-September), 6.6% in Q3 (October-December), and 6.3% in Q4 (January-March).
