RBI Cuts Repo Rate by 50 Basis Points to 5.5%
“In this global milieu, the Indian economy presents a picture of strength, stability, and opportunity,”
RBI Cuts Repo Rate by 50 Basis Points to 5.5%
The Reserve Bank of India (RBI) on Thursday, June 6, 2025, announced a 50 basis points (bps) cut in the repo rate, bringing it down to 5.5%.
RBI Governor Sanjay Malhotra stated, “The Monetary Policy Committee (MPC) decided to reduce the policy repo rate under the Liquidity Adjustment Facility (LAF) by 50 basis points to 5.5%, with immediate effect. Accordingly, the Standing Deposit Facility (SDF) rate is revised to 5.25%, while the Marginal Standing Facility (MSF) rate and the Bank Rate now stand at 5.75%.”
The 55th meeting of the Monetary Policy Committee was held on June 4, 5, and 6, against the backdrop of an early and promising start to the monsoon season, which Governor Malhotra described as “vital for the Indian economy.”
In contrast, he highlighted that the global backdrop remains “fragile and highly fluid.” While uncertainty surrounding the global economic outlook has somewhat eased since the MPC's last meeting in April due to optimism around trade negotiations, risks still remain high enough to dampen sentiment and weaken global growth prospects.
“As a result,” Malhotra noted, “multilateral agencies have revised both global growth and trade projections downward.”
He further explained that the last mile of disinflation is proving more protracted, as the growth-inflation tradeoff becomes increasingly complex. “Monetary authorities are now charting a more cautious and carefully calibrated policy trajectory,” he said.
Malhotra also pointed to the rising challenges posed by economic and financial fragmentation, elevated global debt levels, and emerging frontier technologies such as Artificial Intelligence (AI), which he said are raising financial stability concerns globally. “Amidst heightened volatility in capital flows and exchange rates, and constrained policy space, central banks in emerging economies face greater challenges,” he said.
India, however, stands out. “In this global milieu, the Indian economy presents a picture of strength, stability, and opportunity,” Malhotra added.
Explaining the rationale behind the rate cut, Malhotra said, “Inflation has softened significantly over the last six months — from above the tolerance band in October 2024 to well below the target. The latest reading is 3.2%, with signs of broad-based moderation. The near-term and medium-term outlook gives us confidence in a durable alignment of headline inflation with the target of 4%.”
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