RBI MPC Meeting LIVE: Repo Rate Cut by 50 Bps, GDP Growth Forecast at 6.5% – Sanjay Malhotra

RBI MPC Meeting LIVE: Repo Rate Cut by 50 Bps, GDP Growth Forecast at 6.5% – Sanjay Malhotra

On June 6, 2025, the Reserve Bank of India (RBI) announced a significant monetary policy decision aimed at stimulating economic growth amidst global uncertainties. The Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, reduced the repo rate by 50 basis points to 5.5%, marking the third consecutive rate cut this year. Additionally, the Cash Reserve Ratio (CRR) was slashed by 100 basis points to 3%. Despite these measures, the RBI retained its GDP growth forecast for the current fiscal year at 6.5%.

Key Highlights from the RBI MPC Meeting

1. Repo Rate Reduction

The MPC’s decision to cut the repo rate by 50 basis points was more aggressive than the anticipated 25 basis points, bringing the rate down to 5.5%. This move aims to lower borrowing costs, thereby encouraging investment and consumption. With this cut, the RBI has reduced the repo rate by a total of 100 basis points in 2025.

2. Cash Reserve Ratio (CRR) Cut

In a bid to enhance liquidity in the banking system, the RBI reduced the CRR by 100 basis points to 3%. This measure is expected to infuse approximately ₹2.5 lakh crore into the banking system by December 2025, facilitating increased lending to various sectors.

3. Policy Stance Shift

The RBI shifted its monetary policy stance from ‘accommodative’ to ‘neutral’, indicating a more balanced approach in future policy decisions. Governor Malhotra emphasized that while there is limited room for further rate cuts, the central bank remains committed to supporting growth while keeping inflation in check.

4. Inflation Outlook

The RBI revised its inflation projection for the current fiscal year to 3.7%, down from the previous estimate of 4%. This downward revision is attributed to favorable monsoon forecasts and stable food prices, providing the central bank with room to maneuver on the monetary policy front.

5. GDP Growth Forecast

Despite global economic headwinds, the RBI maintained its GDP growth forecast at 6.5% for the fiscal year 2025-26. The central bank expressed confidence in the domestic economy’s resilience, citing strong balance sheets across sectors and robust consumption patterns.

Global Economic Context

The RBI’s policy decisions come against the backdrop of global economic uncertainties, including trade tensions and geopolitical risks. Governor Malhotra acknowledged these challenges but highlighted India’s strong macroeconomic fundamentals and adequate foreign exchange reserves as buffers against external shocks.

Market Reactions

The financial markets responded positively to the RBI’s announcements. The Sensex surged over 700 points, while the Nifty gained more than 230 points. Rate-sensitive sectors like banking, real estate, and automobiles witnessed significant gains, reflecting investor optimism about the potential boost to economic activity.

Implications for Borrowers and Investors

The reduction in the repo rate is expected to lead to lower lending rates, making loans more affordable for consumers and businesses. This could stimulate demand in sectors such as housing and automobiles. Investors may also find opportunities in equities, particularly in sectors poised to benefit from increased consumer spending and investment.

Conclusion

The RBI’s proactive measures underscore its commitment to fostering economic growth while maintaining price stability. By front-loading rate cuts and enhancing liquidity, the central bank aims to navigate the Indian economy through global uncertainties and set the stage for sustained recovery.