Key Highlights
In order to support growth while inflation stays below the 4% target, the Reserve Bank of India's (RBI) six-member Monetary Policy Committee (MPC) is expected to lower the repo rate, the key policy rate, by 25 basis points (bps) during the policy meeting on June 4–6.
The repo rate would be lowered for the third time in a row since February 2025. Additionally, economists think the RBI will continue to pursue a "accommodative" monetary policy approach.
What can be expected from the RBI's upcoming monetary policy?
Since inflation is low, the six-member MPC is expected to reduce the repo rate by 25 basis points (bps) and set it at 5.75 percent at the next meeting. One hundredth of a percentage point is the same as one basis point (bps).
The RBI is likely to reduce policy rates by 25 basis points next month. Because inflation has slowed down sharply, central banks now have more chance to reduce their main interest rates. Because demand conditions, both at home and abroad, are uncertain, central bank support is needed to sustain growth,” said Gaura Sengupta, Chief Economist at IDFC First Bank.
In April, headline inflation as seen in the all-India consumer price index (CPI) fell to 3.2 percent which is the lowest point since July 2019, down from 3.3 percent in March. Because food prices are continuing to fall, CPI has gone down.
Based on economists’ views, as inflation stayed below 4%, food prices dropped strongly and CPI has not passed the 4% target for the last three months, that trend is expected to continue over the next year.
According to the flexible inflation targeting (FIT) framework, the RBI is responsible for keeping the CPI inflation rate close to 4% (within a band of +/-2%).
Considering the modest inflation and steady growth, the RBI says the monetary policy should support economic growth, keeping in mind the fast changes happening in the global economy.
Will the policy stance change?
According to analysts, the MPC's monetary policy stance will likely remain 'accommodative'.
The rate-setting panel's stance shifted from neutral to accommodative in April.
Will the RBI revise its GDP and inflation forecast?
Economists expect the RBI to revise its real GDP and inflation projections for FY26.
"The commentary on growth and inflation will be important because their forecasts for both parameters are expected to be revised. It is also expected that the RBI will detail its analysis on how the global environment would affect the Indian economy, given that the tariff reprieve provided by the US would end in July," said Madan Sabnavis, Chief Economist at Bank of Baroda.
The RBI estimates that CPI inflation will be 4% in FY26. The RBI's annual report stated that the easing of supply chain pressures, the softening of global commodity prices, and higher agricultural production as a result of a likely above-normal south-west monsoon bode well for the inflation outlook in FY26.
"Any potential downward revision in FY26 CPI inflation will be closely watched, as it will provide an indication of the depth of the rate cutting cycle," according to IDFC First Bank's Sengupta.
For FY26, a real GDP growth rate of 6.5% is anticipated. The January–March 2025 quarter saw a four-quarter high of 7.4% for the domestic economy. The growth rate for fiscal year 2024–2025 was 6.5 percent, which was the lowest in four years.indicate
According to the RBI's most recent annual report, "the Indian economy is poised to sustain its position as the fastest growing major economy during 2025-26, supported by a pickup in private consumption, healthy bank and corporate balance sheets, easing financial conditions, and the government's continued push on capital expenditure."
Also Read: RBI Expected to Cut Rates by 25 bps on June 6 and Again in August: Poll
How would a repo rate cut affect borrowers?
All Associated External Benchmark Lending Rates (EBLR) will decrease by the same amount if the repo rate is lowered by 25 basis points. A 25 basis point decrease in equated monthly installments (EMIs) for home and personal loans will be advantageous to borrowers.
Most banks have lowered their repo-linked lending rates by the same amount after the repo rate was lowered by 50 basis points since February 2025. Additionally, lenders have lowered the MCLR, or marginal cost of funds-based lending rate.
Is the RBI likely to lower the repo rate further?
Experts predict that the RBI will aim for a 50 basis point reduction in the current fiscal year after the probable June policy repo rate cut.
According to Aditi Nayar, chief economist at ICRA Ltd., "Two additional cuts are anticipated in the next two policy reviews, bringing the repo rate to 5.25 percent by the end of the cycle."
Sahil Lakshmanan, Chief Business Officer at CarePal Money highlights "With inflation at 3.16% in April 2025 and the repo rate at 6%, the upcoming RBI MPC meeting holds significant potential to shape India's economic trajectory. We expect the committee to maintain its accommodative stance, possibly signaling further rate cuts to bolster growth while keeping inflation in check. A sustained low-rate environment would significantly benefit the healthcare financing sector by reducing borrowing costs, enabling us to offer more affordable loans to individuals and small businesses facing medical expenses. This could drive increased demand for our tailored financing solutions, empowering more customers to access critical healthcare services. CarePal Money is poised to capitalize on these policy dynamics, reinforcing our commitment to delivering innovative and accessible financing options to meet the unique needs of the healthcare ecosystem."
Govind Sankaranarayanan, Co-founder and Chief Operating Officer at Ecofy states, “With the RBI’s recent annual report reinforcing a growth-supportive monetary stance and signaling confidence in moderating inflation, we remain optimistic about further policy easing in the upcoming MPC meeting. For climate-focused NBFCs like Ecofy, continued accommodative policy, coupled with RBI’s commitment to ensure adequate liquidity for productive sectors, can significantly enhance access to affordable capital for green assets. As global headwinds persist, it's encouraging to see a calibrated approach that balances growth with prudence. We hope this also opens avenues for targeted green finance initiatives that can accelerate India’s transition towards a low-carbon economy.”
Amid easing inflation and a stable economic outlook, expectations are rising that the Reserve Bank of India (RBI) will announce another repo rate cut at its upcoming Monetary Policy Committee (MPC) meeting in the first week of June.
The Monetary Policy Committee (MPC), consisting of six members—three from the RBI and three appointed by the central government—meets every two months to set key interest rates aimed at keeping inflation within the government’s target.
Following two earlier rate cuts that eased borrowing costs, industry leaders expect the upcoming reduction to further boost consumer confidence, especially among homebuyers, and support broader economic growth.
Pradeep Aggarwal, Founder & Chairman at Signature Global (India), says, "The Reserve Bank of India is once again expected to offer major relief to homebuyers in its upcoming MPC meeting by reducing the repo rate by 25 basis points, driven by easing inflation and a stable economic outlook. If the rate cut materializes, it would mark the third consecutive reduction and provide a significant boost to the overall economy, particularly the housing sector.
Given that several scheduled commercial banks have been reducing their lending rates following the previous two RBI MPC outcomes, another rate cut at this juncture would act as a catalyst for increased housing demand across segments. As a result, both first-time homebuyers and investors are likely to be encouraged to enter the real estate market, further strengthening demand across the sector."
Ashok Kapur, Chairman at Krishna Group and Krisumi Corporation, says, "The RBI had adopted an accommodative stance in its previous policy review meeting, and it is expected that we will again see a cut in the repo rate by 25 bps in the upcoming policy review cycle, giving further relief to the various sectors of the economy. The real estate sector in particular stands to benefit from a reduction in policy rates, as it makes home loans affordable for buyers, pushing housing demand upwards.
A boost to real estate demand will also have a multiplier effect on allied sectors like cement, steel, and construction equipment, further driving economic momentum. Moving forward, the year looks promising for overall housing demand, and it will present an opportunity for all stakeholders to collaborate and innovate to meet the rising demand efficiently."
Raoul Kapoor, Co-CEO at Andromeda Sales and Distribution, says "There are strong indications and widespread expectations that the Reserve Bank of India (RBI) will implement a third round of rate cuts during the upcoming Monetary Policy Committee (MPC) meeting in the first week of June.
In the previous MPC meeting, the Governor made it clear that the RBI will maintain an accommodative stance, suggesting that policy rates are not likely to increase and may continue to decrease in the near future. With inflation remaining under control and various other economic factors aligning favorably, we anticipate that the RBI will announce a policy rate cut of 25 basis points. Should this occur, it would bring the cumulative rate cuts in the calendar year 2025 to a notable 75 basis points.
A total reduction of 75 basis points is substantial and would yield significant savings for borrowers. This is particularly beneficial for large borrowers, such as those taking out home loans, who stand to gain both from lower interest payments and increased eligibility for loans. The easing of rates not only provides immediate financial relief but also stimulates consumer spending and investment, potentially bolstering overall economic growth. As a result, both existing and potential borrowers can look forward to a more favorable borrowing landscape in the coming months.
