RBI MPC meeting: Here are the key highlights from the central bank’s June 2025 policy review

In a bold move to revive growth and ease financing conditions, the Reserve Bank of India (RBI), during its Monetary Policy Committee (MPC) meeting on June 6, 2025, announced a series of pro-growth measures.

These include another repo rate cut, a phased CRR reduction, and a downward revision in the inflation forecast. The policy signals a continued effort by the central bank to support the economy amid a favourable inflation outlook and improving macroeconomic conditions.

Here are the key announcements explained in detail:

1. Repo rate cut by 50 basis points to 5.5%

The RBI slashed the repo rate by 50 basis points, bringing it down to 5.5 per cent. This marks the third consecutive repo rate cut in 2025, following a 25-basis point cut in February, and another 25-basis point reduction in April.

The cumulative rate cut now stands at 100 basis points for the calendar year.

The repo rate is the rate at which the RBI lends to commercial banks. Lowering this rate makes loans cheaper, potentially boosting credit demand from consumers and corporates. With this aggressive rate action, the RBI aims to energise investment and spending across key sectors of the economy.

2. CRR to be reduced by 100 basis points in four stages

In a major liquidity-boosting measure, the RBI also announced a 100-basis point cut in the Cash Reserve Ratio (CRR) — from 4 per cent to 3 per cent. The CRR is the minimum percentage of a bank’s total deposits that must be held in reserve with the central bank.

This reduction will be implemented in four tranches — on September 6, October 4, November 1, and November 29.

According to the RBI, this move will inject nearly ₹2.5 lakh crore into the banking system, enhancing liquidity and supporting stronger credit growth.

3. Inflation forecast for FY26 lowered to 3.7%

The RBI revised down its inflation forecast for FY26 to 3.7 per cent, from its earlier estimate of 4 per cent. This signals that the central bank sees price pressures easing in the coming months.

According to Governor Malhotra, factors such as record wheat production, higher output of pulses, and a moderation in global commodity prices are expected to help keep inflation in check. However, he cautioned that the RBI remains watchful of weather-related risks that could affect food prices.

Here’s the revised quarterly CPI outlook:

• Q1: 2.9 per cent

• Q2: 3.4 per cent

• Q3: 3.9 per cent

• Q4: 4.4 per cent

4. GDP growth forecast retained at 6.5% for FY26

Despite the rate cuts and liquidity measures, the RBI chose to keep its GDP growth projection unchanged at 6.5 per cent for FY26, reflecting confidence in the resilience of the Indian economy.

Growth is expected to be driven by reviving investment activity, steady rural demand, and above-normal monsoon forecasts. However, the central bank also highlighted downside risks from global trade tensions, weather uncertainties, and slower foreign inflows.

Here are quarter-wise GDP estimates:

• Q1: 6.5 per cent

• Q2: 6.7 per cent

• Q3: 6.6 per cent

• Q4: 6.3 per cent

5. Policy stance shifts from ‘accommodative’ to ‘neutral’

In a notable shift, the MPC voted to change its policy stance from ‘accommodative’ to ‘neutral’, marking the end of an ultra-easy monetary phase. This means the central bank will now make future rate decisions based on evolving data, rather than being biased toward further cuts.

While the RBI remains supportive of growth, it has also signalled readiness to respond quickly to any resurgence in inflation or external shocks.

6. Sector-specific insights: lending stress eases, forex reserves strong

Governor Malhotra noted that stress in unsecured loans and credit card segments has eased, although microfinance loans remain under pressure. On the external front, India’s merchandise and services exports are holding up well despite global headwinds.

The current account deficit (CAD) for FY26 is projected to remain within sustainable levels, supported by resilient remittance inflows and a strong forex reserve position of $691.5 billion as of May-end.

The June 2025 policy signals a strong push to accelerate India’s growth cycle, supported by lower rates and higher liquidity.

At the same time, the RBI has shown prudence by adopting a neutral stance, reflecting its intent to remain flexible in a fluid global environment.