RBI Cuts Policy Repo Rate by 50 Basis Points to 5.5 %

The Reserve Bank of India (RBI) has cut its policy repo rate by 50 basis points (0.50%) and maintained the growth rate forecast of 6.5 % for the Indian economy in 2025-26. The policy repo rate is the rate at which the RBI gives short-term loans to the banks.

RBI has also announced a staggered 1% cut in the cash reserve ratio (CRR) to 3 %. 

Since February 2025,  the RBI has reduced the policy repo rates by 100 basis points or 1%.

The RBI Governor, Sanjay Malhotra, announced the bi-monthly monetary Policy on 6 June. The next bi-monthly monetary policy will be announced on 6 August 2025.

Cut in Policy Repo Rate 

• Since February 2025, the RBI has cut the policy repo rate by 100 basis points. 
• In February, it cut the policy repo rate by 25 basis points (0.25%) to 6.25 %. 
• In April, it again cut the rate by 25 basis points to 6 per cent. Now it has been reduced to 5.5 % with immediate effect. 

Staggered Cut in the CRR 

The RBI Governor announced a staggered cut of 1% in the CRR to 3 % of the net demand and time liabilities (NDTL) during the year. 

• The CRR will be cut in four stages. In every stage, the CRR will be cut by 0.25 %.
• The first reduction of 0.25 % will be made on 6 September, followed subsequently on 4 October, 1 November, and 29 November.
• On 29th November 2025, the CRR will be reduced to 3%.
• According to the RBI, the 1% cut in CRR is expected to release Rs 2.5 lakh crore liquidity in the banking system by December 2025.
• CRR is the percentage of a bank's net demand and time liabilities (NDTL) that it has to keep in cash with the RBI.

Rates and Ratios 

The policy repo rate is the RBI's main tool for liquidity management under its liquidity adjustment facility (LAF). 

All the other RBI rates—the standing deposit facility (SDF) rate, marginal standing facility (MSF) rate, and the Bank Rate—are linked to the policy repo rate. 

The fixed reverse repo rate is not linked to the policy repo rate.

The new rates effective from 6 June 2025 are as follows 

• Policy Repo Rate - 5.50% (earlier 6.0%)
• Fixed Reverse Repo Rate- 3.35 % (No change)
• Standing deposit facility (SDF) - 5.25% (earlier 5.75%)
• Marginal Standing Facility(MSF)- 5.75%(earlier 6.25%)
• Bank Rate - 5.75% (earlier 6.25%)

Reserve Ratios 

• Cash Reserve Ratio(CRR)- 4.00% (to be reduced gradually by 1 % by 29 November 2025)
• Statutory Liquidity Ratio (SLR)- 18% (No change)

GDP growth forecast for 2025-26  

According to the provisional estimates released by the National Statistical Office (NSO) on 30 May 2025, the country’s GDP growth in 2024-25 was 6.5 per cent.

RBI expects the Indian economy to grow by  6.5 % in 2025-26.

RBI forecasts the quarterly growth rate for the financial year 2025-26 as follows.

• Q1 (April to June 2025) at 6.5%;
• Q2 (July to September 2025) at 6.7%; 
• Q3 (October  -December 2025 ) at 6.6%; and
• Q4 (January-March 2026) at 6.3%.

Monetary Policy Committee (MPC)

Established on 29 September 2016 by the government of india.

It is a statutory body established under the Reserve Bank of India Act 1934.

Function

Set the policy interest rate of the RBI to achieve the inflation target set by the government of India. 

Members 

Six members -  Sanjay Malhotra, RBI Governor, and chairman of the MPC.

Other members are  Dr. Nagesh Kumar, Prof. Ram Singh, Saugata Bhattacharya, Dr. Rajiv Ranjan, and Dr. Poonam Gupta.