MUMBAI, June 6 — In a decisive move to stimulate economic growth, the Reserve Bank of India (RBI) on Friday slashed the benchmark repo rate by 50 basis points, bringing it down to 5.5%—the lowest level in three years.
The sharper-than-expected rate cut comes as India’s GDP growth slowed to a four-year low of 6.5% in FY25, prompting the central bank to act swiftly. With this move, the RBI has now reduced the policy rate by a total of 100 basis points since February 2025, including a 25 bps cut in April.
Announcing the decision after a three-day meeting of the Monetary Policy Committee (MPC), RBI Governor Sanjay Malhotra said, “After a detailed assessment of the evolving macroeconomic and financial developments, as well as the economic outlook, the MPC decided to reduce the repo rate by 50 basis points.”
The repo rate—the interest rate at which banks borrow from the RBI—was last at a similar level (5.40%) in August 2022. The current easing cycle marks the first time since the Covid-19 pandemic that the central bank has undertaken three successive rate cuts, beginning in February 2025.
The move is expected to bring relief to borrowers across segments—home, auto, and corporate—by lowering interest rates on loans.
“The front-loading of rate cuts was considered necessary to support growth,” Malhotra said, while adding that monetary policy now has limited space left to further support economic expansion.
The rate-setting panel also revised its policy stance from ‘accommodative’ to ‘neutral’, signaling a more balanced approach moving forward.
Despite the slowdown, the RBI retained its GDP growth projection for FY25 at 6.5%. Meanwhile, the central bank revised its inflation forecast downward to 3.7%, from the earlier estimate of 4%, citing a favorable monsoon outlook as a key factor for price stability.
“The inflation trajectory appears better anchored, and that gives us more confidence in supporting the growth agenda,” Malhotra noted.
The RBI’s aggressive monetary easing is seen as a response to both domestic and global headwinds, and economists believe the central bank may now adopt a wait-and-watch mode.
