The Reserve Bank of India (RBI) scored 50 basis points more than expected on Friday, cutting key reposting with third consecutive cuts. It also reduced bank reserves as it provided space for policymakers to focus on supporting economic growth.
Reserve Bank of India’s Monetary Policy Committee (MPC) panel cumulatively cut Since the policy review in February, the repository rate has been 100 basis points. However, RBI Governor Sanjay Malhotra revealed that there is limited room for central banks to support growth. Therefore, the monetary policy stance has been changed from “adjusted” to “neutral.”
According to MalhotraCentral banks in emerging market economies have done more difficult tasks to stabilize the economy in this “global environment” coupled with constrained policy spaces, with increasing capital flows and exchange rate volatility. He added that the Indian economy has presented a photograph of strength, stability and opportunity.
Malhotra claims that price stability maintains purchasing power
#rbimopc | 🚨RBI Governor Sanjay Malhotra said, “There is stability in all three aspects: price, financial and political. #RBI #rbipolicy #sanjaymalhotra #reporate pic.twitter.com/dkkevlk0gp
– MoneyControl (@moneycontrollolcom) June 6, 2025
Malhotra claims that price stability maintains purchasing power, adding that it has stability in all three aspects. Price, finance, politics. Price stability has given households and businesses certainty in their savings and investment decisions, according to the RBI Governor. It also secured gay interest rates and financial position, all driving consumption, investment and overall growth.
The Ministry of Statistics Implementation reported that RBI fee reductions occurred amid a steady decline in RBI rate reductions during the fourth quarter of 2024-25 when India’s GDP rose to 7.4%. The ministry also revealed that it had eased retail inflation to 3.16% in April, down from 3.34% in March, well below the RBI comfort level of 4%. The Indian government estimated GDP growth rate of 6.5% on February 25, 2024.
“This decision is a consonant with the objective of achieving the medium-term consumer price index (CPI) inflation target within the +/- 2% band while supporting growth.”
– Sanjay Malhotra, Governor of the Reserve Bank of India
RBI reduced its reporate by 25 basis points from 6.25% to 6% at its previous MPC meeting held on April 7-9. It went from 6.5% to 6.25% following a similar cut in February, informing central bank pivots towards growth-promoting policies as it eases inflationary pressures.
RBI policy will boost market mood as Indian stock markets see a sharp turn
Indian Stock Market I saw it Sharp turnaround after the morning flat start, both benchmark indexes gain strength afterwards RBI Policy announcement. Sensex jumped from 488 points or 0.60% to 81,930.37, but the nifty guys reached 24,919.30 from 168 points or 0.68%.
The Nifty Bank Index has traded around 56,260.75, up nearly 500 points or 0.90% within minutes of the announcement. Sectors such as banks, automobiles and realty led the rally with nearly 1% profit, lifting overall sentiment.
The RBI Governor said the rate of permanent deposit facilities (SDF) based on liquidity adjustment facilities (LAF) has been adjusted to 5.25%, with marginal standing facilities (MSF) rates and bank charges can withstand 5.75%. He pointed out that in the future, economic activity will continue to maintain momentum from 2025-26, supported by private consumption and traction in fixed capital formation. Atul Monga, CEO and co-founder of Basic Home Loan, said the upcoming MPC conference could become a key indicator of India’s wider economic recovery.
The RBI Governor also said that in order to provide durability, the central bank has decided to reduce its cash reserve ratio (CRR) by 3% from 4%. He adds that this will take place in four equal tranches of 25 basis points during the year, each of which will take effect from two weeks starting on September 6th, October 4th, November 1st and November 29th of this year. With the reduction in CRR, around Rs 2.5 crore will be released to the banking system by the end of November 2025.
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