RBI cuts rate by 50 bps as inflation dips to 3.7%

In its June 2025 policy, the RBI cut the repo rate by 50 bps to 5.5% and the CRR by 100 bps, citing easing inflation and strong growth outlook. Inflation for FY26 was revised down to 3.7%, while GDP growth remains steady at 6.5%.

In a bold move during the June 2025 Monetary Policy Committee (MPC) meeting, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points, bringing it down to 5.50%. RBI Governor Sanjay Malhotra announced the decision on June 6, highlighting strong economic fundamentals and sustained moderation in inflation. This marks the third consecutive rate cut, following 25 bps reductions in both April and February.

The central bank revised its inflation forecast for FY26 down to 3.7%, from the earlier projection of 4%. Retail inflation stood at 3.16% in April, and the Union Bank of India anticipates it could fall further to a six-year low of 3%. The RBI cited both near-term and medium-term price stability as grounds for the aggressive cut.

The growth outlook also remains strong. India’s GDP is expected to expand by 6.5% in FY26, with quarterly growth projected between 6.1% and 6.7%. The RBI noted robust performance in non-gold imports and a 14% increase in gross FDI for FY25 as signs of economic resilience.

In a further liquidity-boosting measure, the central bank cut the Cash Reserve Ratio (CRR) by 100 bps to 3%, to be implemented in four staggered tranches of 25 bps each. This move is expected to infuse ₹2.5 lakh crore into the banking system. Standing Deposit Facility (SDF) balances have averaged ₹2 lakh crore over the past two months, indicating comfortable liquidity conditions.

With inflation easing and growth holding steady, the RBI appears confident in steering the economy through a phase of stable expansion while supporting demand through accommodative policy.