Mumbai, June 6: The Reserve Bank of India (RBI) on Friday slashed its benchmark repo rate by 50 basis points to 5.5%, delivering a surprise “jumbo” cut to support growth as inflation continues to ease. The move marks the third consecutive rate cut this year, bringing the total reduction to 100 basis points since February.
The Monetary Policy Committee (MPC) also lowered the cash reserve ratio (CRR) by 100 basis points to 3%, a move expected to inject ₹2.5 lakh crore into the banking system. The central bank simultaneously shifted its policy stance from “accommodative” to “neutral.”
“The decision is based on a comprehensive assessment of macroeconomic conditions,” said RBI Governor Sanjay Malhotra at the conclusion of the MPC’s three-day deliberations. “With inflation well below target and growth projections subdued, we have acted decisively to provide support to the economy.”
This is the sharpest policy easing since the pandemic-era 75-bps emergency rate cut in March 2020. The RBI also trimmed its inflation forecast for the fiscal year by 30 basis points to 3.7%, down from its earlier projection of 4%. Retail inflation fell to 3.16% in April, compared to 3.34% in March, staying comfortably below the RBI’s 4% threshold.
With the repo rate now at 5.5%, the Standing Deposit Facility (SDF) rate has been adjusted to 5.25%, while the Marginal Standing Facility (MSF) rate and Bank Rate have been set at 5.75%.
The surprise magnitude of the rate cut lifted investor sentiment. The Nifty Bank index surged over 500 points from the day’s low after the policy announcement. A CNBC-TV18 poll had forecast a more modest 25-bps cut, citing subdued inflation and slowing GDP growth as key factors.
RBI’s easing cycle began in February with a 25 bps cut, followed by another in April. At that time, the central bank had signaled a pivot toward a more pro-growth stance amid waning inflationary pressures.
The next MPC meeting, originally scheduled for August 6–8, has been advanced to August 5–7 due to administrative exigencies. The aggressive policy action signals the RBI’s readiness to act ahead of the curve as it balances the dual mandate of price stability and economic growth in an increasingly uncertain global environment.
