RBI Slashes Repo Rate by 0.50% to Boost Growth; Loans to Get Cheaper

Mumbai, June 6 – In a move aimed at supporting economic growth amid easing inflation, the Reserve Bank of India’s Monetary Policy Committee (MPC) on Friday announced a 0.50 percent cut in the key policy rate (repo rate) for the third consecutive time. The decision is expected to bring relief to borrowers by making home, auto, and personal loans cheaper. With this, the RBI has reduced the repo rate by a total of 1 percent since February 2025.

Announcing the decision after the MPC's 55th meeting—its second bi-monthly review for the current financial year—RBI Governor Sanjay Malhotra said the earlier two cuts were of 0.25 percent each, and this time a more aggressive cut of 0.50 percent has been approved. The revised repo rate of 5.5 percent comes into effect immediately.

To further ease liquidity in the system, Malhotra also announced a phased reduction in the Cash Reserve Ratio (CRR) by 1 percent. This measure is projected to infuse around Rs. 2.5 lakh crore of liquidity into the banking system. Consequently, the CRR will drop from 4 percent to 3 percent.

As per agency report, under the Liquidity Adjustment Facility (LAF), the revised policy repo rate of 5.5 percent will be accompanied by a new Standing Deposit Facility (SDF) rate of 5.25 percent, while the Marginal Standing Facility (MSF) and bank rate will be adjusted to 5.75 percent.

Governor Malhotra emphasized that after reducing the repo rate by 100 basis points since February 2025, the MPC believes that the scope for further rate cuts has now narrowed. Therefore, it has decided to shift its stance from “accommodative” to “neutral.” Moving forward, the MPC will closely monitor incoming data and evolving conditions to maintain a balanced approach between growth and inflation.