Key Highlights

• RBI cuts repo rate by 50 basis points to 5.5%, shifts policy stance to neutral.
• Cash Reserve Ratio reduced by 100 basis points, injecting ₹2.5 lakh crore liquidity into banking system.

The Reserve Bank of India's (RBI) second bi-monthly monetary policy for FY26 was revealed on Friday. The Monetary Policy Committee members and the RBI Governor agreed to cut the repo rate by 50 basis points, to 5.50%. This announcement means the third straight reduction in repo rate by the central bank.

The RBI changed its policy from "neutral" to "accommodative" at the April meeting, and it lowered the repo rate by 25 basis points.

The Monetary Policy Committee decided to shift the stance from accommodative to neutral after determining that monetary policy had reached its limit in supporting growth through three 100 basis point reductions in repo rates in February, March, and April. The MPC will now closely look at new information and changes in the situation to choose the best possible Monetary Policy for controlling growth as well as inflation.

Also Read: Why RBI's MPC Could Opt for a Third Straight Repo Rate Reduction?

The fact that the policy repo rate was lowered by 100 basis points each month since February 2025 meant that Monetary Policy practically had no options for growth support. The Monetary Policy Committee, therefore, decided to alter the policy stance and go from accommodative to neutral. The MPC will henceforth study new data and trends closely to decide on the future actions of Monetary Policy needed to achieve the desired growth and inflation balance, according to Malhotra.

Six members make up the MBC: the RBI Governor, the Deputy Governor of monetary policy and a representative from the RBI Central Board. The Union government nominated the three members.