Repo Rate Cut to 5.50%: RBI Policy June 2025
Why in the news
To support growth and lower borrowing costs, the Reserve Bank of India trimmed the repo rate by 50 basis points after a three-day Monetary Policy Committee meeting led by Governor Sanjay Malhotra.
Rates announced
| Instrument | New rate | Earlier |
|---|---|---|
| Repo rate | 5.50% | 6.00% |
| Standing Deposit Facility (SDF) | 5.25% | not stated |
| Marginal Standing Facility (MSF) | 5.75% | not stated |
| Bank Rate | 5.75% | not stated |
Key facts
- Third cut in 2025 and the largest single cut in more than two years.
- Stance: shifted from accommodative to neutral, so later cuts will hinge on inflation and growth data.
- Next MPC meeting: August 4-6, 2025.
- A reduction in the Cash Reserve Ratio (CRR) frees more money for bank lending.
Reasons for the cut
- Inflation: CPI at 3.2% in April 2025, lowest in nearly six years, helped by cheaper food, moderate fuel and steady core prices.
- Growth: projected 6.5% for 2025-26; room to lift consumption and private investment.
- Global risks: uncertainty and trade tensions called for a supportive stance.
Impact
- Repo-linked home, car and personal loans should get cheaper; banks and NBFCs expected to pass on relief in coming weeks.
- Small firms and start-ups may see lower working-capital costs.
- FD rates likely to fall, hurting savers, especially senior citizens.
- Older loans tied to MCLR or base rate may be worth refinancing.
- Affordable and mid-segment housing may see better demand.
Exam angle
- Repo rate after cut: 5.50%; SDF: 5.25%; MSF and Bank Rate: 5.75%.
- Policy stance: neutral.
- MPC chair: RBI Governor.