Mumbai (Maharashtra), June 6, 2025: In a major move aimed at stimulating economic activity amid easing inflation, the Reserve Bank of India (RBI) today announced a 50 basis points cut in the policy repo rate, bringing it down from 6.0% to 5.5%. The decision was taken during the 55th meeting of the Monetary Policy Committee (MPC) held on June 4–6, 2025, in Mumbai.
Key Highlights of RBI Monetary Policy – June 2025
Repo Rate Cut to 5.5%
RBI Governor Sanjay Malhotra confirmed that the repo rate under the Liquidity Adjustment Facility (LAF) has been reduced by 50 basis points, effective immediately. The move comes on the back of softening retail inflation and improving macroeconomic indicators.
“The reduction recommended by the MPC is for 50 basis points to 5.5 per cent. This is with an immediate effect,” – RBI Governor Sanjay Malhotra.
Adjusted Policy Rates Post Decision:
| Policy Instrument | New Rate (%) |
|---|---|
| Repo Rate | 5.50 |
| Standing Deposit Facility (SDF) | 5.25 |
| Marginal Standing Facility (MSF) | 5.75 |
| Bank Rate | 5.75 |
Why the Rate Cut?
- Retail Inflation eased to 3.16% in April 2025, down from 3.34% in March, as per the Ministry of Statistics and Programme Implementation (MoSPI).
- The figure is now below the RBI’s comfort level of 4%, encouraging the central bank to adopt a dovish stance.
- Food inflation remains low, and core inflation is under control, according to RBI’s outlook.
- The Monsoon has made a timely and healthy start, which may positively impact rural demand and food prices.
Global & Domestic Outlook
While the global economic outlook remains fragile, with several multilateral agencies downgrading global growth projections, the Indian economy shows resilience:
- Domestic demand is firming up.
- Manufacturing and services PMI have remained in the expansion zone.
- Foreign direct investments (FDI) continue to flow, signaling investor confidence.
RBI’s Recent Rate Trend
In its April 2025 MPC meeting, RBI had already cut the repo rate by 25 basis points, from 6.25% to 6.0%. The current cut marks the second consecutive rate reduction, totaling a 75 basis points cut in just two months, signaling a shift towards an accommodative monetary policy stance.
What This Means for You
For Home Loan Borrowers:
- Expect EMIs to reduce as banks align their lending rates with the new repo rate.
- Cheaper loans may spur real estate demand and boost housing sales.
For Businesses:
- Lower interest rates mean reduced cost of borrowing, encouraging capital investment and expansion.
- MSMEs and startups could particularly benefit from better credit access.
📉 For Savers:
- Bank deposit rates may decline, impacting returns on fixed deposits (FDs) and other savings instruments.
Expert Takeaway
The RBI’s aggressive rate cut signals its confidence in the inflation trajectory and its commitment to supporting growth. As India enters a phase of economic consolidation, lower borrowing costs could provide the much-needed liquidity to fuel consumption, investment, and infrastructure growth.
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