RBI Cuts Repo Rate by 50 Basis Points to 5.5%, Third Consecutive Reduction
The Reserve Bank of India (RBI) on Friday announced a significant 50 basis points reduction in the key lending rate, bringing the repo rate down to 5.5% from 6%, marking the third consecutive rate cut since February 2025.
The decision was announced by RBI Governor Sanjay Malhotra following the conclusion of the three-day Monetary Policy Committee (MPC) meeting that began on June 4. The central bank also shifted its policy stance to ‘neutral’ from ‘accommodative’, signaling a more cautious approach going forward.
“After a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook ahead, the MPC decided to reduce the policy repo rate under the Liquidity Adjustment Facility by 50 basis points to 5.5%,” Governor Malhotra announced during the press conference.
Alongside the repo rate cut, the RBI also adjusted the Standing Deposit Facility (SDF) rate to 5.25%. This move is expected to make borrowing cheaper across the financial system and provide additional liquidity to banks.
The latest reduction follows previous cuts of 25 basis points each in February and April 2025, bringing the total reduction to 100 basis points over the past four months.
In a significant policy shift, the RBI changed its monetary stance from ‘accommodative’ to ‘neutral’, indicating that the central bank believes it has limited room for further rate cuts.
“After having reduced the policy repo rate by 100 basis points in quick succession since February 2025, the Monetary Policy Committee felt that under the present circumstances, monetary policy is now left with very limited space to support growth,” Governor Malhotra explained.
The Governor emphasized that future monetary policy decisions will be data-driven, with the MPC carefully assessing incoming economic indicators to maintain the right balance between growth and inflation.
The rate cut has been welcomed by the real estate sector, with industry experts predicting immediate benefits for homebuyers and developers.
Dharmendra Raichura, VP & Head of Finance at Ashar Group, said the reduction “translates to lower home loan interest rates, making homeownership more affordable and accessible.”
“This is especially encouraging for first-time buyers and those looking to upgrade. For developers, improved buyer sentiment is likely to boost demand, allowing them to offer more attractive financing options and launch new projects with greater confidence,” Raichura added.
The aggressive rate cuts come amid concerns about slowing economic growth and the need to stimulate domestic demand. The RBI has been balancing the need to support growth while keeping inflation in check.
Governor Malhotra noted that “the fast-changing global economic situation necessitates continuous monitoring and assessment of the evolving macroeconomic outlook.”
The central bank’s decision reflects ongoing challenges in the global economy, including trade tensions, geopolitical uncertainties, and varying monetary policies across major economies.
The rate cut is expected to benefit borrowers across sectors, including personal loans, business loans, and mortgages. Banks are likely to pass on the benefits to customers, though the transmission may vary across different financial institutions.
Fixed deposit rates are expected to decline further, encouraging savers to look for alternative investment options and potentially boosting equity markets.
