RBI Monetary Policy Highlights: RBI cuts repo rate by 50 bps, CRR by 100 bps; Guv says ‘We have won war against inflation’

The outlook for inflation points towards benign prices across major constituents. RBI Governor Sanjay Malhotra said, “The record wheat production and higher production of key pulses in the Rabi crop season should ensure adequate supply of key food items. Going forward, the likely above normal monsoon along with its early onset augurs well for Kharif crop prospects.”

Reflecting this, he added, inflation expectations are showing a moderating trend, more so for the rural households. Most projections point towards continued moderation in the prices of key commodities, including crude oil.

“Notwithstanding these favourable prognoses, we need to remain watchful of weather-related uncertainties and still evolving tariff related concerns with their attendant impact on global commodity prices. Taking all these factors into consideration, and assuming a normal monsoon, CPI inflation for the financial year 2025-26 is now projected at 3.7 per cent,” he added.

Going forward, the outlook for the agriculture sector and rural demand is expected to receive further impetus by the expected above normal southwest monsoon rainfall.

On the other hand, the RBI governor said, sustained buoyancy in services activity should nurture revival in urban consumption.

“The healthy balance sheets of banks and corporates; government’s continued thrust on capex; elevated capacity utilisation; improving business optimism and easing of financial conditions should help further revive investment activity,” Sanjay Malhotra said.

However, he added, trade policy uncertainty continues to weigh on merchandise exports prospects, while conclusion of free trade agreement (FTA) with the United Kingdom and progress with other countries should provide a fillip to trade in goods and services.

“Spillovers emanating from protracted geopolitical tensions, and global trade and weather-related uncertainties pose downside risks to growth. Taking all these factors into consideration, real GDP growth for 2025-26 is projected at 6.5 per cent with Q1 at 6.5, Q2 at 6.7, Q3 at 6.6 and Q4 at 6.3 per cent. The risks are evenly balanced,” Malhotra said.

Elaborating on the rationale for the RBI’s decisions, Governor Sanjay Malhotra said, “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 per cent, as exuded in the last meeting but also the belief that during the year, it is likely to undershoot the target at the margin. While food inflation outlook remains soft, core inflation is expected to remain benign with easing of international commodity prices in line with the anticipated global growth slowdown.”

Growth, on the other hand, remains lower than aspirations amidst a challenging global environment and heightened uncertainty.

Thus, he added, “It is 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 frontloading the rate cuts to support growth.” Accordingly, the MPC voted to reduce the policy repo rate by 50 basis points to 5.50 per cent.

RBI Governor Sanjay Malhotra said, “The uncertainty around the global economic outlook has somewhat ebbed since the MPC met in April in the wake of temporary tariff reprieve and optimism around trade negotiations. However, it is still high to weaken sentiments and lower global growth prospects.”

Accordingly, he added, global growth and trade projections have been revised downwards by multilateral agencies. “Moreover, the last mile of disinflation is turning out to be more protracted. As growth-inflation trade-off is becoming more challenging, monetary authorities are charting out a more cautious and carefully calibrated policy trajectory,” the RBI governor said.

– The minutes of the MPC’s meeting will be published on June 20, 2025.

– The next meeting of the MPC is scheduled from August 4 to 6, 2025.

RBI Governor Sanjay Malhotra said, “The outlook for inflation points towards benign prices across major constituents. The record wheat production and higher production of key pulses in the Rabi crop season should ensure adequate supply of key food items. Going forward, the likely above normal monsoon along with its early onset augurs well for Kharif crop prospects. Reflecting this, inflation expectations are showing a moderating trend, more so for the rural households.”

Notwithstanding these favourable prognoses, he said, the central bank will need to remain watchful of weather-related uncertainties and still evolving tariff related concerns with their attendant impact on global commodity prices.

RBI Governor Sanjay Malhotra said that the central bank has decided to change the stance from ‘accommodative’ to ‘neutral’. Governor Malhotra said that under the current circumstances, monetary policy is left with very limited space to support growth.

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The Indian stock market saw a sharp turnaround after a flat start in the morning, with both benchmark indices gaining strength post the RBI policy announcement. The Sensex jumped 488 points or 0.60% to 81,930.37, while the Nifty climbed 168 points or 0.68% to 24,919.30, as investors cheered the central bank’s stance. Sectors like banking, auto, and realty led the rally, lifting overall sentiment.

The Street welcomed the RBI‘s latest monetary policy with a thumbs up, as rate-sensitive sectors led the charge. The Nifty Bank index surged nearly 500 points or 0.90% within minutes of the announcement, trading around 56,260.75.

Other sectors like auto, metals, and realty also saw gains of close to 1%.

Going forward, RBI Governor Sanjay Malhotra said, economic activity continues to maintain the momentum in 2025-26, supported by private consumption and traction in fixed capital formation. “The sustained rural economic activity bodes well for rural demand, while continued expansion in the services sector is expected to support the revival in urban demand. Investment activity is expected to improve in light of higher capacity utilization, improving balance sheets of financial and non-financial corporates, and government’s capital expenditure push,” he said.

Further, the RBI governor said that trade policy uncertainty is still affecting India’s export outlook. However, the finalisation of a free trade agreement with the UK and progress with other countries should help boost trade. On the supply side, he maintained, agriculture is expected to do well due to a good monsoon forecast and steady performance in related sectors. The services sector is also likely to remain strong.

That said, he added, ongoing geopolitical tensions, global trade issues, and weather-related risks could impact growth.

The MPC voted to reduce the policy repo rate by 50 bps to 5.50 per cent with immediate effect. Consequently, RBI Governor Sanjay Malhotra said, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.75 per cent.

“This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth,” he said.

The RBI governor said that in order to provide durable liquidity, the central bank has decided to reduce the cash reserve ratio (CRR) by 100 basis points to 3 per cent from 4 per cent earlier. This, he added, will be done in a staggered manner during the course of the year, in four equal tranches of 25 basis points, each coming into effect from the fortnights beginning, September 6, October 4, November one and November 29 of this year.

The cut in CRR would release primary liquidity of about Rs 2.5 lakh crore to the banking system by the end of November 2025, he said.

RBI Governor Sanjay Malhotra announced that the MPC has decided to maintain the FY26 GDP growth forecast at 6.5 per cent. The risks are evenly balanced, said Malhotra.

GDP growth estimates:

FY26: 6.5%

Q1FY26: 6.5%

Q2FY26: 6.7%

Q3FY26: 6.6%

Q4FY26: 6.3%

RBI Governor Sanjay Malhotra announced that the central bank has revised inflation forecast for FY26 lower to 3.7 per cent from 4 per cent.

Inflation estimates:

FY26: Revised from 3.7% to 4%

Q1FY26: Revised from 2.9% to 3.6%

Q2FY26: Revised from 3.4% to 3.9%

Q3FY26: Revised from 3.9% to 3.8%

Q4FY26: Maintained at 4.4%

After having reduced the policy repo rate by 100 basis points in quick succession since February 2025, Sanjay Malhotra said that the Monetary Policy Committee felt that under the present circumstances, monetary policy is now left with very limited space to support growth. Hence, the MPC decided to change the stance from ‘accommodative’ to ‘neutral’.

From here onwards, he added, 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, the fast changing global economic situation to necessitate continuous monitoring and assessment of the evolving macro economic outlook.

RBI Governor Sanjay Malhotra said that amid global uncertainty, which has ebbed to somewhat extent, the Indian economy presents a picture of strength, stability and opportunities. He explained, “First strength comes from the strong balance sheets of the five major sectors, corporates, banks, households, government and the external sector. Second, there is stability on all three fronts, price, financial and political providing policy and economic certainty in this dynamically evolving global economic order. Third, the Indian economy offers immense opportunities to investors, both domestic and foreign.”

After its three day deliberations, RBI MPC led by Governor Sanjay Malhotra announced a 50 bps cut in repo rate, taking the key interest rate to 5.50 per cent.

It’s time! RBI Governor Sanjay Malhotra has started his speech and will announce the much-awaited decision taken by the RBI MPC on the key interest rate. Economists are expecting a 25 bps cut. All eyes on repo rate, inflation forecast, GDP growth estimates, among other economic indicators.

Aditi Nayar, Chief Economist & Head – Research & Outreach, ICRA Limited, said, “With CPI inflation forecast to trail 4% for a large part of this fiscal, monetary easing by the MPC is likely to continue. A 25 bps rate cut is expected, followed by two more cuts over the subsequent two policy reviews, taking the repo rate to 5.25% by the end of the cycle.”

With the RBI MPC ending its three-day deliberations today, the Governor will announce the decision on the key interest rate today. Sanjay Malhotra will start his speech at 10:00 am.

India’s economic growth slowed to 7.4 per cent in the fourth quarter of 2024-25, down from 8.4 per cent in the same quarter last year, as per provisional estimates by the National Statistics Office (NSO). The deceleration was driven by weaker performance in manufacturing, consumption (both private and public), and key service sectors. For the full fiscal year FY25, GDP growth dropped to 6.5 per cent—the lowest in four years—compared to 9.2 per cent in the previous year.

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India’s retail inflation, measured by the Consumer Price Index (CPI), eased to 3.16 per cent in April, down from 3.34 per cent recorded in March, according to data released by the Ministry of Statistics & Programme Implementation. This 18-basis-point drop marked the lowest year-on-year inflation rate since July 2019. Notably, CPI inflation had peaked at a 14-month high of 6.21 per cent in October.

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The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) will announce its decision on the key interest rate today (June 6). Nomura has projected a total repo rate cut of 100 basis points for this year—twice the market consensus of 50 bps. This would lower the terminal policy rate to 5.00 per cent. The brokerage noted, “Our forecast of a 100 bps reduction exceeds the consensus view of 50 bps, and we believe the risks are tilted toward additional cuts in 2026.”

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Sankar Chakraborti, MD & CEO, Acuité Ratings & Research Limited, said that markets are expecting a third straight rate cut. April inflation dropped to 3.2 per cent, the lowest since July 2019, and has stayed below 4 per cent for three months, indicating a steady and broad-based easing of price pressures, not just a temporary fall. This drop in inflation, he added, is not limited to food prices but spans multiple parts of the consumer basket, giving the RBI room to support growth without worrying about rising prices.

Furthermore, while India remains the fastest-growing major economy, there are underlying concerns. Despite a strong 7.4 per cent GDP growth in Q4, the full-year growth was only 6.5 per cent—the slowest in four years—raising caution among policymakers.

Sankar Chakraborti also talked about global challenges like slower growth, trade tensions, and weak export demand that add further pressure. In this scenario, he said, a supportive monetary policy could help ease some of the burden.

During the June meeting, the RBI MPC had decided to keep the repo rate unchanged at 6.5 per cent for the eight consecutive time by a 4:2 majority. The RBI had raised its GDP growth forecast for FY25 to 7.2 per cent from 7 per cent earlier, while retaining the FY25 inflation forecast at 4.5 per cent.

The RBI MPC had met in August and decided to keep the benchmark interest rate unchanged at 6.50 per cent. The MPC had voted by a 4 to 2 majority to hold the policy rate. The central bank had retained real GDP growth estimates for FY25 at 7.2 per cent, and CPI inflation projection at 4.5 per cent.

In the October MPC meeting, the RBI had decided to keep the policy repo rate unchanged at 6.50 per cent for the 10th consecutive time. Five members had voted in favour of the decision. The central bank had also decided to change its stance to ‘Neutral’ while the focus remained unambiguously on inflation. GDP growth for FY25 was projected at 7.2 per cent and inflation for the financial year at 4.5 per cent.

Before February, the MPC had met in December 2024, under the former Governor Shaktikanta Das. The central bank had decided to keep the key rates unchanged at 6.50 per cent. Moreover, recognizing the country’s liquidity constraints, the MPC had reduced the Cash Reserve Ratio (CRR) for banks by 50 bps, bringing it down to 4 per cent.

In the February 2025 meeting, which was also the first meeting under the leadership of Governor Sanjay Malhotra, the RBI MPC had announced a 25 bps cut in the benchmark repo rate to 6.25 per cent from 6.5 per cent. This was the first reduction in repo rate in nearly five years. The MPC had also decided unanimously to continue with the neutral stance.

In its April 2025 meeting, the Reserve Bank of India (RBI) had announced a reduction in the repo rate. The RBI’s MPC had unanimously decided to cut the repo rate by 25 basis points. With this, the standing deposit facility (SDF) rate came in at 5.75 per cent, while the marginal standing facility (MSF) and the Bank Rate stood at 6.25 per cent. The RBI also changed its policy stance from “neutral” to “accommodative”, which means the central bank is now more focused on supporting growth, and further rate cuts could be on the table if needed.