Key Highlights
- RBI’s MPC cuts repo rate by 50 bps to 5.50%, shifts stance from accommodative to neutral.
- CRR slashed by 100 bps to 3%, aiming to boost liquidity and support lending across banks.
The Reserve Bank of India's Monetary Policy Committee voted 5-1 to lower the benchmark interest rate by 50 basis points in June.
"The MPC voted to reduce the policy repo rate by 50 basis points to 5.5 percent. Dr. Nagesh Kumar, Prof. Ram Singh, Dr. Rajiv Ranjan, Dr. Poonam Gupta, and Sanjay Malhotra voted to lower the policy repo rate by 50 basis points. Saugata Bhattacharya voted for a 25-bps cut in the repo rate," according to the RBI's minutes from the committee's meeting on June 4-6.
"A measured and cautious progress in policy easing is more appropriate at this time," Bhattacharya stated.
According to the minutes released on Friday, RBI Governor Malhotra stated that given the current macroeconomic conditions and outlook, monetary policy should support growth while remaining consistent with the goal of price stability.
CRR cut
The six-member rate-setting panel also lowered the cash reserve ratio (CRR) by 100 basis points to 3%. The RBI cut its inflation forecast for 2025-26 to 3.7% from 4%.
Also Read: India's WPI Inflation Falls to 0.39% in May; Lowest Level in 14 Months
The repo rate is the rate at which banks borrow from the RBI, and the CRR is a percentage of cash that all banks must keep on deposit with the RBI. Previously, the RBI cut the CRR by 100 basis points during the covid-19 pandemic in 2020, when the economy required a significant boost in growth.
