• Source:JND
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RBI MPC: Reserve Bank of India Governor Sanjay Malhotra on Friday announced that the Monetary Committee decided to reduce the repo rate by 50 basis points to 5.50%, bringing it below 6%. The repo rate was lowered to 5.50% after a three-day Monetary Policy Committee (MPC) meeting, which commenced on June 4. 

In addition to the rate cut, the RBI MPC agreed to change the stance to neutral. The governor announced a surprise 100 basis point to 3 per cent cut in CRR, to be implemented in four tranches of 25 basis points each. Additionally, the RBI lowered the MSF and bank rates to 5.75 per cent and the SDF to 5.25%. The MSF is the upper band of the interest rate corridor, and the SDF is the lower band.

Following a quarter-point cut in February—its first since May 2020—the committee has now lowered rates by 100 basis points in 2025. In April, it cut about the same size. 

RBI Lower Inflation ForecastRetail inflation has dropped well below the RBI's medium-term target of 4%, which coincides with the massive rate cut. The RBI MPC lowered the previous forecast for FY26 inflation from 4% to 3.7%. The 6.5% GDP growth forecast for FY26 stayed the same.

The RBI MPC's third consecutive rate cut follows the government's release of the GDP figures for the fourth quarter and the entire year 2024–2025.

GDP Prediction

The RBI retained its GDP prediction for FY26 at 6.5%. Considering the international concerns, the governor claimed that the Indian economy offers strength, stability, and opportunity.  According to Malhotra, the RBI has maintained its forecast for GDP growth in the current fiscal year at 6.5%, but there are challenges due to geopolitical unrest and unpredictable weather.

Industry Leaders Welcome RBI's Decision

Amit Prakash Singh, CBO Urban Money & Co-Founder Square Yards, says,  “The RBI’s decision to cut the repo rate by 50 basis points was on the expected lines and marks a proactive step toward stimulating economic growth. This substantial reduction is expected to ease borrowing costs significantly, reduce EMIs, and increase disposable income — all of which are likely to support domestic consumption and drive demand across sectors. With inflation well within the RBI’s comfort range, the move reinforces the central bank’s focus on growth and is poised to have a meaningful impact on the credit landscape, encouraging both consumer and business lending. It signals a timely and growth-oriented policy stance in the face of a moderating economic outlook.”

Rajeev Radhakrishna, CIO- Fixed Income, SBI Mutual Fund says, ''The MPC has surprised markets with a big bang set of measures with a 100bps CRR cut, and 50 bps repo cut. This comes from the perspective of frontloading actions to enable support for growth, considering the lag effects of transmission. At the same time, the shift of stance to neutral has meant that the policy rates may level off at 5.50% in the current cycle. However, this would remain a moving target with incremental data points likely to shape the outcome.''

Ajay Lakhotia, Founder & CEO, StockGro says, "The RBI's rate cut to 5.5% is big news for Indian markets. It has already moved Nifty 1% higher and is likely to push up stocks in sectors that benefit from cheaper money, like real estate, and finance firms. With Inflation under control but higher global uncertainty, the RBI wants to boost spending and business investment in India. Loans will get cheaper, EMIs could go down, and people could spend more. The ripple effects could be even bigger with consumer goods & infrastructure companies seeing more business."

Samir Jasuja, Founder & CEO, PropEquity, says,  "The RBI’s 50 bps cut in repo rate, following the 25 bps cut each in February and April, along with 100 bps reduction in CRR, is bold, timely and progressive given India’s growth momentum. This will enhance liquidity and spur credit growth as India’s GDP growth rose to a four-quarter high of 7.4% in Q4FY25, placing India as the fastest-growing major economy. With retail inflation in the comfort zone, a deep cut in rate and liquidity measures will spur consumption and accelerate India’s growth. Both these measures will ensure faster transmission of rate cut so that the new homebuyers are cushioned from the impact of rising housing prices, and the affordable housing segment also gets a fillip as even a slight reduction in home loan rates impacts buying decisions."

Siddharth Jain, CFO, MinEMI, says, “The RBI’s 50 bps rate cut is a timely and welcome move that offers direct relief to borrowers, particularly those with existing home loans and other repo-linked secured loans. Depending on how borrowers choose to adjust their repayment plan, this can lead to either reduced EMIs or a shorter loan tenure."

Amit Modi, Director, County Group, welcomes RBI's decision, saying, "No doubt, RBI has given us a reason to cheer. The reduction in repo rate by 50 bps will significantly boost the real estate sector. But its ramification goes wider. The move also signals confidence in the country's economy, easing inflationary pressures, and a positive outlook for the future. At the same time, the RBI has also announced a staggered 100 bps CRR cut, in four equal tranches over the year. As a result, about 2.5 lakh crore rupees will be released to the banking system, which will not only boost consumption but also benefit the residential and commercial realty segments."

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