In a major policy move aimed at supporting economic momentum, the Reserve Bank of India (RBI) on Friday cut the repo rate by 50 basis points, bringing it down from 6% to 5.5% under the Liquidity Adjustment Facility (LAF).
RBI Governor Sanjay Malhotra announced the decision following the 55th meeting of the Monetary Policy Committee (MPC), held from June 4 to 6, citing easing inflationary pressures and a stable macroeconomic environment as key factors behind the rate cut.
“The MPC has recommended a 50 basis points reduction in the policy repo rate to 5.5%, effective immediately,” Malhotra stated during his address.
He explained that softening retail inflation, both in the near and medium term, as well as subdued food inflation, provided room for a more accommodative policy stance. India’s retail inflation dipped to 3.16% in April—well below the RBI’s upper tolerance limit of 4%—raising market expectations for a rate cut.
Following the repo rate adjustment:
- The Standing Deposit Facility (SDF) rate stands reduced to 5.25%
- The Marginal Standing Facility (MSF) rate and Bank Rate are now at 5.75%
Governor Malhotra also pointed out that the downward revision of the inflation outlook for the current fiscal supports the RBI’s decision. “There is now stability across key macro indicators—growth is steady, inflation is cooling, and domestic demand is improving,” he said, adding that India continues to offer a robust environment for investors despite a fragile global economic scenario.
The backdrop of an early and promising monsoon added further optimism to the domestic economic outlook, enhancing the RBI’s confidence in easing policy rates.
In the previous MPC meeting held in April, the central bank had already lowered the repo rate by 25 basis points, from 6.25% to 6%, signaling a shift toward a softer interest rate regime amid favorable inflation trends.
With today’s 50-bps cut, the RBI reinforces its focus on stimulating growth while maintaining macroeconomic stability.