On 6-6-2025, the Reserve Bank of India (‘RBI’) released its Monetary Policy Statement for 2025-26, setting the new repo rate, decided at 55th meeting of by the Monetary Policy Committee (‘MPC’) held from 4-6-25 to 6-6-2025. The revised policy repo rate will be applicable from 6-6-2025.
Key Points from RBI’s revised Monetary Policy Statement and New Repo Rate:
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In a meeting led by the Governor of RBI, Mr. Sanjay Malhotra, the MPC voted to reduce the policy repo rate by 50 basis points (bps) bringing it to 5.50%. This adjustment is initiated as part of RBI’s broader mandate to achieve a medium-term consumer price index (‘CPI’) inflation target along with achieving the sustained economic growth.
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The reduction in repo rate marks a strategic shift in India’s monetary policy, reflecting confidence in inflation control and a commitment to economic growth. The consumers and businesses will benefit from lower borrowing costs, but the uncertainties of market remain, which will require a close monitoring of global and domestic factors.
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The Standing Deposit Facility rate is now 5.25%, while the Marginal Standing Facility rate and Bank Rate have been adjusted at 5.75%.
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The RBI has shifted its policy stance from ‘accommodative’ to ‘neutral’ indicating a more balanced approach to future financial policy decisions.
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The MPC highlighted robust economic growth, with Gross Domestic Product (‘GDP’) expanding by 7.4% in Quarter 4 of 2024-25. The GDP growth for 2025-26 stands at 6.5%.
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The decision to reduce repo rate is based on declining inflation, as CPI inflation moderated to 3.2% in April 2025, marking its lowest level in nearly six years.
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The policy shift aims to stimulate investment and private consumption, both essential for sustained economic expansion.
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The MPC minutes will be formally published on 20-6-2025, in compliance with transparency norms.
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The MPC will closely monitor economic conditions before deciding future policy adjustments. The next MPC meeting is scheduled from 4-8-2025 to 6-8-2025.
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By reducing the repo rate, the RBI aims to balance inflation control with economic growth, preventing excessive inflation or financial instability while enhancing borrowing and spending capacity.
