RBI Monetary Policy Committee Reduces Policy Repo Rate by 50 bps to 5.50 Percent
The changes are indicative of a shift effectuated by the MPC, from an “accommodative” to neutral position in line with the fast-changing global environment
The Reserve Bank ofIndia’s Monetary Policy Committee (MPC) concluded its 55th meeting following sessions that lasted three days from June 4 to June 6, 2025.The meeting was presided over by Governor Sanjay Malhotra and was attended by other members in attendance included Dr Nagesh Kumar, Saugata Bhattacharya, Prof. Ram Singh, Dr Poonam Gupta, and Dr Rajiv Ranjan.Stay Updated with the...
The Reserve Bank ofIndia’s Monetary Policy Committee (MPC) concluded its 55th meeting following sessions that lasted three days from June 4 to June 6, 2025.
The meeting was presided over by Governor Sanjay Malhotra and was attended by other members in attendance included Dr Nagesh Kumar, Saugata Bhattacharya, Prof. Ram Singh, Dr Poonam Gupta, and Dr Rajiv Ranjan.
Stay Updated with the Latest Audit Report Formats & Audit Trials Requirements! Click here
One of the most significant outcomes of the meeting came in the form of a decision to reduce the policy repo rate by 50 basis points, bringing it down from 6.00 percent to 5.50 percent with immediate effect.
Adjustments to SDF, LAF, and Other Rates
The Reserve Bank has also effectuated changes to other policy instruments in line with the reductions made towards the repo rate. The Standing Deposit Facility (SDF) rate was revised to 5.25 percent, while the Marginal Standing Facility (MSF) and Bank Rate were both adjusted to 5.75 percent.
The rate cuts are part of a more concerted effort by the committee to shift its monetary policy stance from “accommodative” to “neutral”, signalling a move towards a more balanced and data-driven policy approach for the road ahead.
Inflation, Growth, and Economic Indicators
The Committee took note of the latest financial data, highlighting a robust real Gross Domestic Product (GDP) growth of 7.4 percent in the final quarter of FY 2024-25, driving the annual growth to 6.5 percent.
The Committee is optimistic on the stability of the GDP which is slated to remain at 6.5 percent for FY 2025-26. On the inflation front, headline CPI inflation dropped to 3.2 percent in April 2025, the lowest level in nearly six years.
Assuming a normal monsoon, the committee expects average CPI inflation to be 3.7 percent for the new fiscal year, with quarterly projections gradually rising from 2.9 percent in Q1 to 4.4 percent by Q4, comfortably within the RBI’s 2-6 percent target band.
FTA with UK and Trade Outlook
The meeting has also referenced the positive impacts recently concluded free trade agreement (FTA) with the United Kingdom. The agreement, along with other ongoing trade negotiations is expected to further boost India’s export prospects, even as the global environment remains uncertain and merchandise exports face some headwinds.
Rationale for Decisions and the Way Forward
The MPC has clarified the rationale behind opting for a sharper rate cut - the same being underpinned by the broad-based moderation in inflation below the 4 percent target and the need to reinforce domestic demand amidst global volatility.
Five of the six committee members voted for the 50 basis point cut, while one advocated a more gradual approach. A cumulative reduction of 100 basis points has been effectuated since February 2025.
Looking forward, the committee committed to close monitoring of global developments, geopolitical risks, and weather patterns, to enhance its readiness to act as needed. The minutes of the 55th meeting will be released on June 20, 2025, while the next MPC meeting is scheduled to take place from August 4 to 6, 2025.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
