In a move to support economic growth, the Reserve Bank of India (RBI) has announced a repo rate cut of 50 basis points, bringing the benchmark rate down to 5.50%. This RBI repo rate cut, decided during the 55th Monetary Policy Committee (MPC) meeting held from June 4 to 6, 2025, reflects the central bank’s focus on boosting domestic demand while keeping inflation under control.
Why Did RBI Cut the Repo Rate?
The repo rate cut 2025 comes on the back of a broad-based decline in inflation, especially food prices, and a moderate core inflation outlook. CPI inflation dropped to a six-year low of 3.2% in April 2025, led by favorable food production and a strong Rabi crop. The headline CPI forecast for FY 2025-26 has been revised to 3.7%, with Q1 projected at 2.9%.
Despite strong GDP growth of 7.4% in Q4 of FY 2024-25, there is still a need to stimulate domestic consumption and private investment, especially amid ongoing global uncertainty and geopolitical tensions. This prompted the MPC to frontload a 50 bps cut to maintain growth momentum while ensuring inflation remains within the 4% target band.
Impact of RBI Repo Rate Cut
The RBI repo rate reduced to 5.50% means lower borrowing costs across sectors. Home, auto, and personal loans are expected to become cheaper, providing relief to consumers. Here’s how the impact of RBI repo rate cut is expected to play out:
- Consumers: Lower EMIs on existing and new floating-rate loans.
- Businesses: Easier access to capital, improving investment and expansion.
- Stock Markets: Potential boost due to improved corporate profitability and consumption.
- Bond Markets: Likely rally as lower rates make fixed-income assets more attractive.
Revised RBI Policy Rates (as of June 6, 2025)
| Rate Type | New Rate |
|---|---|
| Repo Rate | 5.50% |
| Standing Deposit Facility | 5.25% |
| Marginal Standing Facility | 5.75% |
| Bank Rate | 5.75% |
RBI’s Stance: Accommodative to Neutral
While the MPC unanimously voted for the repo rate cut, it also shifted its stance from “accommodative” to “neutral”, signaling a more data-driven approach going forward. Governor Sanjay Malhotra emphasized that future actions would be calibrated to strike the right balance between growth and inflation management.
The next MPC meeting is scheduled for August 4–6, 2025.
Conclusion: This RBI interest rate news marks a critical juncture in India’s monetary policy. With inflation under control and growth needing support, the RBI cuts repo rate by 50 basis points to catalyze recovery and ensure financial stability. As the economic outlook evolves, this proactive move could play a vital role in enhancing consumption, investment, and overall market confidence.
