RBI MPC highlights: From 'jumbo' repo rate cut to CRR cut by 100 bps, here’s everything Sanjay Malhotra’s team rolled out

The Reserve Bank of India’s Monetary Policy Committee (MPC) concluded its 55th meeting on June 6, 2025. Chaired by RBI Governor Sanjay Malhotra, the committee reviewed the current state of the economy and took several key decisions aimed at supporting growth and managing inflation.

Big Repo Rate Cut

The MPC voted to cut the repo rate by 50 basis points, bringing it down to 5.5%. This was a bigger cut than most experts expected and came into effect immediately. The move is meant to support the economy while keeping inflation under control.

As a result:

• The Standing Deposit Facility (SDF) rate is now 5.25%
• The Marginal Standing Facility (MSF) and Bank Rate are now at 5.75%

Why did they cut rates?

The main reasons behind this decision were:

• A sharp fall in inflation, especially in food prices
• Slowing global growth
• A need to boost domestic demand and investments

Inflation dropped to 3.2% in April 2025, the lowest in nearly six years. Food inflation has gone down for six months straight. This helped give the RBI confidence that prices are under control.

At the same time, economic growth is not as strong as the RBI would like. While India’s GDP grew 7.4% in the last quarter of 2024-25, the overall annual growth was 6.5%, which the RBI considers lower than desired.

RBI cuts CRR by 100 bps to boost liquidity: Here’s what it means

In a major move to support the banking system, the Reserve Bank of India (RBI) has announced a 100 basis points (bps) cut in the Cash Reserve Ratio (CRR), bringing it down from 4% to 3% of Net Demand and Time Liabilities (NDTL).

The cut will happen in four steps, with 25 bps being reduced in each phase, starting on September 6, and followed by November 1 and November 9. The move is expected to release Rs 2.5 lakh crore into the banking system by the end of November 2025.

RBI Governor Sanjay Malhotra said, “This gradual cut in CRR is meant to offer long-lasting liquidity support without affecting financial stability. Since January, we’ve already added Rs 9.5 lakh crore to durable liquidity, and this is a continuation of that plan.”

Growth Outlook for 2025-26

The RBI expects the Indian economy to grow at 6.5% in 2025-26. The quarterly forecast is:

• Q1: 6.5%
• Q2: 6.7%
• Q3: 6.6%
• Q4: 6.3%

Growth will be supported by:

• Strong rural demand
• Higher government capital spending
• Better private investment
• Continued strength in the services sector

However, risks remain due to:

• Global uncertainties
• Trade policy changes
• Geopolitical tensions
• Weather-related disruptions

Inflation Outlook: Better Than Expected

The inflation forecast for 2025-26 has been revised down to 3.7% from the earlier 4%. Quarterly CPI inflation is now expected to be:

• Q1: 2.9%
• Q2: 3.4%
• Q3: 3.9%
• Q4: 4.4%

This optimistic view is based on:

• Record wheat and pulse production
• Above-normal monsoon predictions
• Lower global commodity prices

Change in Policy Stance

With inflation falling and growth still moderate, the MPC also decided to shift its stance from accommodative to neutral.

Who Voted for What?

Of the six MPC members:

• Five (Sanjay Malhotra, Nagesh Kumar, Ram Singh, Poonam Gupta, Rajiv Ranjan) voted for a 50-bps cut
• One (Saugata Bhattacharya) voted for a smaller 25-bps cut

The next MPC meeting will be held from August 4 to 6, 2025. Until then, the RBI will monitor the economy closely and decide on future actions based on inflation, growth, and global trends.