RBI MPC Meeting Highlights: Repo rate cut by 50 bps in frontloading, CRR cut by 100 bps announces RBI governor Sanjay Malhotra; EMIs to come down, policy stance changes to neutral

“The RBI’s bold 50 basis point cut in the policy repo rate, bringing it down to 5.5%, has surprised markets and underscores a clear pivot towards supporting growth amid subdued economic momentum and easing inflation. With a cumulative 100 bps cut over just four months, the central bank has frontloaded its easing cycle. However, by reverting its stance to neutral, the RBI signals that it may now pause to assess the full transmission of these cuts before considering further action,” says Rahul Goswami, CIO & MD, India Fixed Income, Franklin Templeton.

"The RBI’s bold move to cut the repo rate by 50 bps to 5.5% and slash the CRR by 100 bps is a decisive step toward easing systemic liquidity. With ₹2.5 lakh crore expected to be released through the CRR reduction, this injection will significantly reduce the cost of funds for NBFCs like ours. Combined with the RBI’s revised FY26 inflation forecast of 3.7%, well below its 4% target, this policy signals a pro-growth shift, offering room to extend affordable credit to India’s large salaried middle class, especially at a time when urban demand is rebounding and investment activity is picking up,” says Amit Bansal, Founder, BharatLoan.

* The RBI Monetary Policy Committee (MPC) banked on soft inflation to frontload policy easing measures, while growth is expected to ease below 7% this year. Easing food costs and benign core-core inflation (core ex-precious metals) are likely to keep 2Q25 inflation close to ~3%, tracking below our full-year forecast at 3.8%, which is below the central bank’s target. Added to this, the benign core prints also point to economic slack, limiting the risk of second-derivative impact on price pressures.
* In recent months, an accommodative liquidity view had also pushed overnight rates below the repo rate, acting as a de facto cut. The central bank had also started to cut its FX forward positions, countering the impact through a string of open market operation purchases. This saw the total net short dollar position in the forwards book fall to $52.4bn in April, down from $78bn in February. As we had noted earlier, more than two-thirds of these maturities were in the 3M to 1Y bucket, necessitating staggered counteraction and were unlikely to be rolled over. Besides other salutary motives, liquidity infusion via the CRR cut would also aid this process and ensure it is non-disruptive, while shielding the currency.
* While growth momentum is weakening at the margin, this step to frontload easing measures is likely a pre-emptive move to arrest further slowdown in economic activity. Data out last week showed real GDP growth at a strong 7.4% y/y in 1Q25 (4QFY25) vs our forecast of 7% and consensus at 6.8%. This marked an increase from an upwardly revised 6.4% the quarter before and took the FY25 average to 6.5%, in line with our projection. The headline real GDP received a one-off boost from net indirect taxes (a sharp fall in subsidy payments), which widened the wedge between the GDP and GVA gauges. The supply measure GVA, which rose 6.8% in 3QFY from 3QFY’s 6.5%, provided a better handle on the underlying growth impulse. A catch-up in public investments (fixed asset investments rose 9.4% y/y vs 5.2% in 3QFY), firmer farm output, a tailwind to rural demand, and contribution from net exports (on lower imports) were key support areas, whilst urban demand softened, besides lacklustre private capex.
* In the year ahead, consumption is likely to receive a hand from easing inflation and flush liquidity conditions, a timely monsoon, and income tax cuts. Other engines of growth are likely to moderate, amid a weak credit impulse, modest budgeted increase in the Centre’s fiscal spending, and global uncertainties impacting exports and the private sector capex cycle. Our forecast of 6.1% y/y growth in FY26 is more conservative than the central bank’s 6.5% estimate.
* With our forecast of the terminal rate being met, further rate reductions are likely if the growth momentum weakens anew.

Above is the outlook by Radhika Rao, Executive Director and Senior Economist at DBS Bank.

"Today's MPC policy surprised the bond market with front loading of rate cut & liquidity with a larger-than-expected 50 bp cut and 100 bp reduction in CRR. With this, the MPC has delivered a 100 bp cut in the Repo Rate. The banking system's liquidity has also turned sufficiently positive. All these is aimed at propelling the economy to the next potential level. The policy stance has been changed to neutral. That may dampen the sentiment a bit for the time being,” says Dhawal Dalal, President & CIO-Fixed Income, Edelweiss MF.

“A policy sledgehammer by the RBI : The RBI has delivered a policy bonanza with the clear objective of hastening monetary transmission by the banking system and propelling growth. The RBI MPC announced a surprise 50bps cut in the policy repo rate to 5.50%, a completely unexpected 100bps rate cut in the Cash Reserve Ratio (CRR) from 2HFY26., yet accompanied by a shift in stance to neutral from accommodative. The outsized cut and guidance on liquidity are bold and clear signals for policy transmission to lower lending rates. Money market rates are significantly lower by 20-35 bps, while government bond yields are mixed, with short end yields lower but longer end yields somewhat higher, as prospects of further OMOs have clearly diminished. Corporate bonds in the 2–5-year segment have performed very well, with yields moving lower, along with spread compression on the back of these measures. We remain positive on our outlook for interest rates, with a focus on the short to medium end of the corporate bond curve,” says Shriram Ramanathan – CIO, Fixed Income, HSBC Mutual Fund.

“The 50-basis-point rep rate cut should lead to reduction in home loan interest rates, both for new and existing home loan borrowers. However, the quantum and time of the rate cut transmission would depend on factors like type of interest rate benchmarks used by the lenders, their rate reset related policies regarding, rate reset dates set for the borrowers, etc.

The transmission would be quickest and absolute in case of existing home loans linked to the repo rate. The exact date of rate cut transmission to the existing borrowers would depend on the rate reset dates set by their respective lenders. Till then, they will continue to repay their loans as per their existing interest rates.

As the cost of funds of the lenders play a major role in determining their internal benchmark rates, there would be a longer lag in the transmission of repo rate cuts to home loans linked to MCLR- or other internal benchmarks.

Applicants planning to avail home loans would also benefit from the repo rate cut as and when banks start to reset their home loan interest rates as per their interest rate reset policies. If the banks continue with their existing spreads/credit risk premium, the quantum of rate reduction for new home loan borrowers would be the same as existing borrowers. However, the quantum of rate reduction would be different if the lenders change their spread/credit risk premium,” says Santosh Agarwal, CEO, Paisabazaar.

“The RBI’s 50 bps policy rate cut, coupled with a 100 bps reduction in the cash reserve ratio (CRR), exceeded both our expectations and the market consensus. As the Governor indicated, this frontloading of monetary easing reflects a clear intent to support growth while inflation remains benign. At the same time, the policy stance has been shifted from ‘accommodative’ to ‘neutral’. Although this change might be read as a signal that the rate cut cycle is nearing its end, we believe it is aimed at tempering any potential “irrational exuberance” in the financial markets.

With the RBI lowering its inflation projection by 30 bps to 3.7%, the real policy rate now stands comfortably above the central bank’s preferred zone of 100-150 bps. Against this backdrop, we expect the RBI to pause for the next couple of meetings, monitoring both inflation trends and the pace of policy transmission. Further rate cuts—possibly in the range of 25-50 bps—may be on the cards in 2025 if conditions remain supportive.

Overall, the policy decision is constructive for both equity and debt markets. In equities, interest-sensitive sectors are poised to benefit. While lower rates and policy transmission could have weighed on bank net interest margins in the near term, the sizeable CRR cut provides a significant offset, making this a particularly positive move for banks” says Sujan Hajra, Chief Economist & Executive Director, Anand Rathi Group.

“The RBI’s 50 basis point rate cut in today’s MPC meeting reflects a timely and well-calibrated response to the prevailing macroeconomic environment—marked by contained inflation and stable liquidity. It reinforces the central bank’s commitment to supporting growth amid ongoing global headwinds.

While a 25-basis-point cut was anticipated, the larger reduction offers significant relief. The move is expected to lower borrowing costs, bolster business confidence, and provide much-needed relief to sectors under pressure. In housing, where affordability is critical, especially in the budget segment, a reduction in interest rates will go a long way in sustaining demand. It will also ease capital costs for developers, potentially reigniting momentum in price-sensitive markets.

This rate cut is more than just a monetary decision—it’s a clear growth catalyst and a strategic push for one of the world’s fastest-growing economies,” said
Dhruv Agarwala, Group CEO, Housing.com & Proptiger.com

RBI governor Sanjay Malhotra said that the transmission of repo rate cuts is faster in this cycle compared to other cycles. It's only been 4 months since the first policy cut, so the transmission is happening faster, it is a good transmission, but it needs to be faster hence we have frontloaded the repo rate cut.

“The MPC has delivered an unexpected outsized policy rate cut of 50bps against a consensus expectation of a 25bps cut. This is accompanied by a 100bps staggered cut in CRR and a change in policy stance to neutral. The decision is likely owing to the GDP prints for Q4 of FY25 reflecting weakness in manufacturing and consumption, as well as the adverse impacts of global trade and conflict headwinds. The policy rate easing, combined with the liquidity increase for banks when system liquidity is already comfortable, is likely to add a second engine to the consumption growth flight that is anticipated to be already in flight from the income tax cuts taking effect in FY26. This is significantly positive for urban consumption, which printed weak in past quarters, and will also likely add a fillip to real estate, discretionary purchases, and private capex,” says Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India.

"RBI has front loaded rate cut cycle by announcing a 50bp Repo rate cut. Terminal rate now stands at 5.50%. The change in stance from Accommodative to Neutral will limit downward movement of yields. CRR cut of 100bp to 3% has surprised the markets and is expected to release liquidity of Rs. 2.5 lakh crore. CRR cut to bring down yields at shorter end significantly. RBI has reiterated that it is committed to ensure price stability and is focused on supporting growth. Any further policy decisions will continue to remain data dependent. Recommended to invest in tenure ranging 3 month to 3 year schemes to take advantage of CRR cut,” says Marzban Irani, CIO of Fixed Income at LIC Mutual Fund.

“The RBI’s decision to slash the repo rate by 50 basis points and the CRR by 100 bps is clearly aimed at fueling consumption and accelerating investment, especially with inflation remaining within the central bank’s comfort zone. With today’s MPC outcome, the repo rate now stands at 5.50%, marking a cumulative reduction of 100 basis points over three sequential rate cuts. This move paves the way for commercial banks to lower their lending rates, making credit more affordable and further boosting demand for real estate.

With several scheduled commercial banks already offering home loans below 8 percent, today’s decision may lead to a broader transmission of lower rates across the lending ecosystem. This will not only ease the financial burden on borrowers but also enhance affordability across housing segments, offering significant relief to homebuyers and providing a timely push for those planning property purchases,” says Jash Panchamia, Executive Director, Jaypee Infratech Limited.

“A third straight cut in the repo rates this year with 50 bps cut instead of an estimate of 25 bps is a pleasant move. This demonstrates a pro-growth stance and a front-loading of rate cuts given our stable economic growth and declining inflation. A change in policy stance from accommodative to neutral is also justified as it can help to strike a right balance between growth and inflation, especially if geopolitical issues escalate further. Today’s policy levers are expected to boost consumption, stimulate domestic growth, and ensure liquidity amongst the varied global challenges,” says Umeshkumar Mehta, CIO, SAMCO Mutual Fund.

“The RBI’s decision to reduce the repo rate by 50 basis points is a strong and timely intervention, especially amid early signs of demand moderation in the residential sector. It also indicates the central bank's confidence in macroeconomic stability and pursuit of growth. Lowering the repo rate to 5.5% will have a cascading effect across the lending ecosystem, bringing home loan interest rates well below 7.75%—a highly encouraging development for both existing and prospective homebuyers.

This rate cut is poised to create a significant improvement in affordability, especially for first-time purchase, this will help revive interest in mid-income and premium housing segments. For developers, available cheaper credit will ease liquidity constraints, accelerate project implementation, and improve delivery timelines. This will, in turn, provide much need cash flow to absorb the unsold inventory while generating fresh buyer interest that is good for the real estate value chain as a whole, thus enabling the growth of this sector and the broader economic revival by dint of its linkages with more than 200 allied industries,” says Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra.

“The RBI’s decision to cut rates by 50bps came as a surprise against our expectations of a third consecutive 25bps rate cut. The regulator is in favour of front-loading rate cuts to support growth. However, the RBI has changed its stance from Accommodative to Neutral. This provides limited scope for further rate cuts. However, softening inflation trends which are expected to remain within or broadly below the tolerance limit and a likely demand recovery can be viewed as positive. The regulator has revised its inflation forecast for FY26 downwards to 3.7% vs 4% earlier, while maintaining its GDP growth forecast at 6.5% for FY26. A surprise CRR cut of 100bps over four tranches effective from Sep’25 should provide further liquidity boost, supporting credit growth for banks.

From a banking sector perspective, the pick-up in credit growth which has been subdued as banks exit FY25 remains pivotal. Hopes are pinned on a possible recovery in H2FY26 supported by falling interest rates, expectations of a strong monsoon, consumption boost from the tax rate cut and potential recovery in demand for the unsecured segments as stress subsides. We see tailwinds for NIMs given the improving systemic liquidity and the deposit rate cuts taken by most banks. However, even as H1FY26 will see a more pronounced impact of the rate cut on NIMs, some respite is expected over H2FY26.

Asset Quality concern appears to be steadily waning with unsecured segment stress showing gradual signs of stability, while the secured segment asset quality continues to hold up well. At present, we would prefer banks with promising growth prospects, healthy deposit franchises, stable asset quality metrics and strong and steady management teams. We continue to prefer the larger private banks and our picks would be HDFC Bank, ICICI Bank and Kotak Bank amongst the larger private banks and City Union Bank amongst the mid-sized banks,” says Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

“We welcome the RBI’s decision to reduce the repo rate by 50 basis points to 5.50% — the third consecutive cut — and view it as a bold and timely step toward stimulating domestic demand. With CPI inflation easing to a four-year low of 3.2%, well below the 4% target, this move reflects the central bank’s confidence in macroeconomic stability and signals a clear shift toward growth-oriented policymaking. This decision comes at a pivotal time, as India, now the world’s fourth-largest economy, is witnessing strong real estate momentum across metros as well as Tier 2 and Tier 3 cities. Lower lending rates will directly enhance home loan affordability, particularly in interest-sensitive categories like mid-income and affordable housing. Reduced EMIs are expected to significantly improve buyer sentiment and encourage first-time homebuyers to enter the market.

Beyond real estate, the rate cut is likely to unlock demand across consumption-driven sectors, revive private investment, and reinforce India’s economic momentum through FY26. A promising monsoon outlook further strengthens this trajectory — boosting rural incomes, easing inflationary pressures, and supporting consumption across semi-urban and rural regions. The cumulative 100 basis point reduction over the last six months is a welcome and strategic move. We are particularly optimistic about its impact on the affordable housing sector, which has been under pressure on both the demand and supply sides. Lower interest rates will increase homebuyer affordability and improve the financial viability of affordable housing projects.

This is a big step forward toward achieving the national goal of 8% GDP growth. We firmly believe that the Indian real estate sector is on track to reach the $1 trillion mark by 2030, contributing significantly to India’s overall vision of becoming an $8 trillion economy by the end of the decade,” said Shekhar G Patel, President, CREDAI.

As affordable financing remains a key driver of demand in real estate, we welcome the RBI's decision to cut the repo rate by 50 bps, thereby encouraging end-users to make purchase decisions. However, it is important is that the benefits are passed on to borrowers immediately. While homebuyers will be able to secure home loans at lower rates, developers will benefit from low borrowing costs, thereby easing financing pressures. Overall, a rate cut would strengthen market confidence, infuse much-needed liquidity, and also act as a strong signal of policy support for the real estate sector and the broader economy, thereby encouraging investments. With sustained demand and softening home loan interest rates, the sector’s growth momentum will definitely accelerate further with continued policy support, firmly establishing the real estate sector as a key driver of the nation's economic development, said Ramani Sastri - Chairman & MD, Sterling Developers.

“A hawkish Deep rate cut by RBI : Front loading of rate cuts by RBI addresses the need to spur growth as short end rates come down aggressively which in turn will assist corporate borrowing through capital markets for the short end. The growth expectations remained at 6.5% for FY26 and inflation expectations lowered to 3.7%.

However we see a large curve steepening as long end rates remain relatively unchanged with RBI stance changing to neutral from accommodative. This implies that further room to cut rates remain limited and data dependent.

A balanced policy encouraging growth. Fixed deposit rates to come down sharply as banks transmit this rate cut. Investors should look at 2-3y corporate bonds for their portfolio as they continue to offer good spreads over government and FD rates and interest rates will come down more gradually for corporate bonds, says Vishal Goenka, Co-Founder of IndiaBonds.com.

The outlook for inflation points towards benign prices across major constituents. The record wheat production and higher production of key pulses in the Rabi crop season should ensure adequate supply of key food items. Going forward, the likely above normal monsoon along with its early onset augurs well for Kharif crop prospects. Reflecting this, inflation expectations are showing a moderating trend, more so for the rural households.

Most projections point towards continued moderation in the prices of key commodities, including crude oil. Notwithstanding these favourable prognoses, we need to remain watchful of weather-related uncertainties and still evolving tariff related concerns with their attendant impact on global commodity prices.

Taking all these factors into consideration, and assuming a normal monsoon, CPI inflation for the financial year 2025-26 is now projected at 3.7 per cent, with Q1 at 2.9 per cent; Q2 at 3.4 per cent; Q3 at 3.9 per cent; and Q4 at 4.4 per cent. The risks are evenly balanced.

Trade policy uncertainty continues to weigh on merchandise exports prospects, while the conclusion of free trade agreement (FTA) with the United Kingdom and progress with other countries is supportive of trade activity. On the supply side, agriculture prospects remain bright on the back of an above normal southwest monsoon forecast and resilient allied activities. Services sector is expected to maintain its momentum. However, spillovers emanating from protracted geopolitical tensions, and global trade and weather-related uncertainties pose downside risks to growth.

CPI headline inflation continued its declining trajectory in March and April, with headline CPI inflation moderating to a nearly six-year low of 3.2 per cent (year-onyear) in April 2025. This was led mainly by food inflation which recorded the sixth consecutive monthly decline. Fuel group witnessed a reversal of deflationary conditions and recorded positive inflation prints during March and April, partly reflecting the hike in LPG prices. Core inflation remained largely steady and contained during March-April, despite increase in gold prices exerting upward pressure.

Inflation has softened significantly over the last six months from the above, from above the tolerance band in October 2024 to well below the target. Latest numbers are 3.2% with signs of a broad based moderation the near term and the medium term outlook now gives us confidence of not only, a durable alignment of headline inflation with the target of 4% you are aware we had earlier projected for this year an average inflation of 4% as excluded in the last meeting, but also the beliefs that during the year it is now likely to undershoot the target at the margin.

While food inflation outlook remains soft, core inflation is also expected to remain benign with easing of international commodity prices in line with the anticipated global growth slow down, the inflation outlook therefore for the year is now being revised downwards from our earlier forecast of 4% to 3.7% growth, on the other hand, remains lower than our aspirations amidst challenging global environment and heightened uncertainty.

To further provide durable liquidity, it has now been decided to reduce the cash reserve ratio, the CRR by 100 basis points from 4% to 3% of net demand and time liabilities.

This will be done in a staggered manner during the course of the year, in four equal tranches of 25 basis points, each coming into effect from the fortnights beginning, September 6, October 4, November one and November 29 of this year.

The cut in CRR would release primary liquidity of about 2.5 lakh crore rupees to the banking system by the end of November 2025.

FDI is high, which indicates that India continues to be a good and attractive investment destination.

Wxternal commercial borrowings and non resident deposits, on the other hand, witnessed higher net inflows compared to the previous year.

As on May 30, 2025, India's foreign exchange reserves are sufficient to fund more than 11 months of goods imports and about 96% of external debt outstanding

Overall, India's external sector remains resilient as key external sector vulnerability indicators continue to improve.

MPC felt that it is imperative to continue to stimulate domestic private consumption and investment through the policy levers to step up the growth momentum, said RBI governor Sanjay Malhotra.

Real GDP growth rate for this year 2526 is projected at 6.5% ;we continue with our earlier forecast with Q1 at 6.5%, Q2 at 6.7%, Q3 at 6.6% and Q4 at 6.3%. The risks are evenly balanced, said RBI governor Sanjay Malhotra.

After having reduced the policy repo rate by 100 basis points in quick succession since February 2025 the Monetary Policy Committee also felt that under the present circumstances, monetary policy is now left with very limited space to support growth. Hence, the MPC also decided to change the stance from accommodative to neutral.

From here onwards, the MPC will be carefully assessing the incoming data and the evolving Outlook to chart out the future course of monetary policy in order to strike the right growth inflation balance, the fast changing global economic situation to necessitates continuous monitoring and assessment of the evolving macro economic outlook.

After a detailed assessment of the evolving macro economic and financial developments and the economic outlook ahead, the MPC decided to reduce, which is widely expected, the policy repo rate under the liquidity adjustment facility by 50 basis points to 5.5% This is the immediate effect. Consequently, the standing deposit facility rate, which is the STF rate, shall stand adjusted to 5.25% and the marginal standing facility MSF rate and the bank rate shall stand adjusted to 5.75%, says RBI governor Sanjay Malhotra.

RBI governor Sanjay Malhotra announced a 50 basis points repo rate cut after the Monetary Policy Committee meeting.

First strength comes from the strong balance sheets of the five major sectors, corporates, banks, households, government and the external sector.

Second, there is stability on all three fronts, price financial and political providing policy and economic certainty in this dynamically evolving global economic order.

Third, the Indian economy offers immense opportunities to investors, both domestic and foreign, says RBI governor Sanjay Malhotra.

Amidst heightened volatility in capital flows and exchange rates, coupled with constrained policy space, central banks of emerging market economies have a tougher task to stabilize their economies against global spillovers in this global milieu, the Indian economy presents a picture of strength, stability and opportunity, says RBI governor Sanjay Malhotra.

The global backdrop remains fragile and highly fluid. The uncertainty around the global economic outlook has somewhat ebbed since the MPC met in April, in the wake of temporary tariff relief and the optimism around trade negotiations. However, it is still high to weaken sentiments and lower global growth prospects, says RBI governor Sanjay Malhotra

"We do believe that given the rather benign inflation conditions and the liquidity situation which has been made very comfortable through various measures of the RBI, the MPC would go in for a 25 bps cut in the repo rate on the June 6th. The commentary on both growth and inflation will be important as there are expectations of revisions in their forecasts for both the parameters," said Madan Sabnavis, Chief Economist, Bank of Baroda.

The RBI is anticipated to provide a comprehensive analysis regarding the impact of global conditions on the Indian economy, particularly considering the conclusion of US tariff relief in July.

With declining inflation rates, experts are monitoring the RBI's potential decision regarding another rate reduction today.

Union Bank of India (UBI)'s latest analysis suggests that the Consumer Price Index (CPI) could reach 3.0 per cent in May, marking its lowest point in six years.
The decrease is primarily attributed to reduced prices of cereals and pulses, despite other categories showing signs of price stabilisation.

Following two consecutive rate reductions and the current trend of moderating inflation, financial experts and market observers are anticipating whether the RBI will implement a more substantial cut to boost economic expansion.

According to CareEdge Ratings, whilst the economy has shown improvement compared to H1 FY25, it is vital to evaluate if the recovery is widespread and if growth can be maintained amidst ongoing global uncertainties.

The fourth quarter revenue growth was primarily attributed to increased net indirect tax collections and reduced import demand, rather than comprehensive sectoral improvements.
"Although agriculture and services have shown resilience, several concerns remain. Subdued manufacturing growth, uneven consumption demand, a delayed recovery in private capital expenditure, and weak exports are key factors that warrant close monitoring," the report noted whilst analysing potential MPC decisions scheduled for Friday.

“Following back-to-back 25 basis point repo rate cuts in February and April this year, bringing the benchmark rate down to 6%, I am optimistic that the RBI will maintain its accommodative stance to support growth, as inflation remains under control.

A supportive monetary policy is important to revive the latent demand in India’s residential real estate market. We are already witnessing signs of this, with the recent rate cuts leading to more competitive home loan offerings. However, its real impact can only be realised once banks transmit these benefits swiftly to consumers.

I expect another 25 bps rate cut, given the downward trend in inflation and the need to strengthen consumer confidence in an uncertain global economic and geopolitical climate. A stable and lower interest rate environment would not only improve affordability but also drive long-term momentum for home ownership, especially in the affordable and mid-income housing segments.

While India’s real estate market has shown resilience, rising property prices and previous rate hikes have impacted affordability. A supportive monetary policy could help offset pressure and win consumer confidence. This can also have a multiplier effect across sectors linked to housing like construction & materials, banking and services.

The upcoming MPC meeting could be a key indicator of India’s broader economic recovery, as well as the direction of our housing aspirations. Any further relaxation of interest rates would be a welcome move for homebuyers and a constructive catalyst for the larger economy,” says Atul Monga - CEO& Co-Founder, BASIC Home Loan.

The Reserve Bank of India could implement more significant interest rate cuts to bolster declining growth whilst maintaining inflation control, according to a recent Morgan Stanley report.

The international financial organisation indicated that the central bank would likely maintain its countercyclical policy stance, implementing measures to bolster economic activity during periods of reduced momentum.

"We expect the RBI to respond with a deeper easing cycle, premised on slower growth, while inflation remains under control," it said.

Morgan Stanley's revised forecast suggests a cumulative rate reduction of 100 basis points (bps) during this cycle, with expectations of two additional 25 bps reductions in the immediate future. These adjustments would result in the repo rate declining to 5.5 per cent.

Bajaj Broking Research shares RBI policy expectations:

Monetary Easing by RBI: The Reserve Bank of India (RBI) began a monetary easing cycle in February and followed it up with another policy rate cut in April. The repo rate currently stands at 6%. Market participants are now watching closely for signs of a potential third rate cut, as expectations build for further monetary support to boost domestic growth amid worsening global macroeconomic conditions.

Drivers of Dovish Shift: The RBI’s dovish turn is primarily driven by two macroeconomic indicators:
* Benign inflation: Headline CPI inflation remains consistently below the RBI’s medium-term target of 4%.
* Signs of cyclical slowdown: GDP growth appears to be softening, worsened by external shocks such as trade disruptions from recent U.S. policy moves.

Growth Forecast Revisions: Several rating agencies and global institutions have downgraded India’s GDP growth projections for FY26. Although the RBI maintained its 6.5% growth estimate in April, others have revised expectations down to a 6.0%–6.3% range.

Accommodative Shift: The MPC has clearly shifted from a neutral to an accommodative stance, indicating the RBI’s intent to inject liquidity and support growth. This pivot is reinforced by April’s CPI inflation easing to 3.2%, the lowest since July 2019 and staying well within the RBI’s comfort zone.

Outlook for Further Rate Cut: With inflation expectations anchored, growth momentum moderating, and external vulnerabilities persisting, the environment is becoming more favorable for another rate cut. While the final decision will depend on evolving global conditions, especially from advanced economies—market consensus is strengthening around the likelihood of a third rate cut to help sustain India’s growth path.

“Indian agriculture has historically been subject to the vagaries of the monsoon, often referred to as “a gamble in monsoon”. While the significance of the monsoon has reduced over the years, it continues to significantly influence agriculture, as well as lives and livelihoods. An asymmetric development is reflected in the steep decline of the share of Indian agriculture from 52% of GDP in 1951 to about 18% in 2024, despite agriculture still accounting for approximately 54% of total employment, thereby impacting economic growth and distributive equity.

The CPI inflation softened to 3.2% in April, the lowest since July 2019, down from 3.3% in March, due to a sustained decline in food prices. CPI inflation is expected to remain range-bound, influenced by factors such as food prices, fuel prices, and economic growth. Given that the monsoon accounts for three-fourths of annual rainfall, with 60% of agriculture being rain-fed, it rejuvenates aquifers and reservoirs and provides an impetus to the rural economy. A normal monsoon bodes well for both economic growth and distributive equity in India.

The latest indications suggest that seasonal rainfall is expected to reach 105% of the Long Period Average (LPA), with a margin of +/-5%. The likelihood of a normal monsoon will also prompt the RBI to cut policy rates by 25 bps to 5.75% in June 2025. This would also mark the third consecutive reduction in the Repo rate since February 2025,” says Dr. Manoranjan Sharma, Chief Economist at Infomerics Valuations and Ratings.

The Monetary Policy Committee meeting of the RBI commenced on June 4, 2025. The outcomes of the two-day MPC deliberations will be announced by Governor Sanjay Malhotra on June 6, 2025 at 10:00 AM.

Analysts will closely examine the governor's statement to gain insights into the central bank's position, its projections for GDP growth, and anticipated CPI inflation trends.

The timing of RBI's evaluation is significant, given the prevailing worries about a possible US economic downturn, worldwide economic slowdown, and potential adverse impacts from the trade tariffs imposed by the Donald Trump administration.

The Monetary Policy Committee (MPC) will likely maintain its priority on backing the current economic growth momentum's recovery, according to a report by Careedge Ratings.

The intelligence organisation stated in its analysis that the rate reduction cycle, which commenced in February, is anticipated to proceed with an additional 25-bps decrease in the repo rate at the June meeting, whilst maintaining an "accommodative stance".

"The healthy growth momentum and the already easing money market rates may prompt the RBI to take incremental steps in policy easing, reducing the likelihood of a larger rate cut in this meeting," CareEdge said in the report.

​​RBI MPC Meeting Live: The global economic landscape remains uncertain due to ambiguous policies and high interest rates. India's economic demand shows signs of weakening.

Despite companies maintaining strong cash flows, the reduced demand has resulted in decreased capital expenditure and operational costs. The government has gained financial flexibility through the RBI's substantial dividend of Rs 2.69 lakh crore.

In this context, Nuvama's analysis suggests that the Reserve Bank of India (RBI) ought to implement a 25 basis point reduction in the repo rate to boost economic growth.

The report stated, "We anticipate the MPC to cut rate by 25bp and potentially guide for more cuts. Demand conditions continue to often, as seen in slowing credit growth, auto sales, RE sales and HH wages, while inflation too has turned quite soft, hovering below 4 per cent on a 3MMA basis, both at the headline and core (ex-commodities) levels."

Sahil Lakshmanan, who serves as the Chief Business Officer at CarePal Money, emphasises the significance of the current policy decision's impact on healthcare financing.

"A sustained low-rate environment would significantly benefit the healthcare financing sector by reducing borrowing costs, enabling us to offer more affordable loans to individuals and small businesses facing medical expenses," he said.

Industry leaders maintain confidence that the central bank will adopt a growth-oriented stance whilst maintaining vigilant oversight of inflation, despite differing opinions regarding rate reductions.

As the RBI's Monetary Policy Committee (MPC) convenes in Mumbai, numerous industry leaders interviewed by ANI anticipate a 25 basis points reduction in repo rate, whilst some express concerns about inflation and expect RBI to maintain equilibrium between growth and inflation control on June 6.

Most business leaders suggest that present economic indicators, characterised by regulated inflation and enhanced growth, create an opportunity for a conservative rate reduction that could enhance credit availability and assist crucial sectors including MSMEs, housing, and healthcare.

Industry experts highlight that inflation levels have stayed within RBI's acceptable range, whilst the economy demonstrates indicators of consistent growth.

Given these circumstances, a 25 bps reduction in the repo rate, from 6 per cent to 5.75 per cent, is considered an appropriate measure that could benefit both borrowers and lending institutions.