RBI Slashes Key Lending Rate By 50 Basis Points To 5.5 Per Cent, Third Cut In A Row; Shifts Policy Stance To 'Neutral'

The Reserve Bank of India (RBI) on Friday (6 June) lowered the repo rate by 50 basis points, cutting it from 6 per cent to 5.5 per cent.

This decision came after the three-day Monetary Policy Committee (MPC) meeting, chaired by RBI Governor Sanjay Malhotra, which commenced on 4 June and concluded today.

"After a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook ahead, the MPC decided to reduce, which is rightly expected, under the Liquidity Adjustment Facility by 50 basis points to 5.5 per cent. Consequently, the Standing Deposit Facility rate, which is the SDF rate, shall stand adjusted to 5.25 per cent," the RBI Governor said, India Today reported.

This comes as a relief for borrowers who may expect lower EMIs for long term loans, especially home buyers.

In addition, Governor Malhotra announced a shift in the RBI's monetary policy stance—from accommodative to neutral—signaling a recalibration in the central bank’s forward guidance.

The RBI also projected that retail inflation for the current financial year would be 3.7 per cent against its April projection of 4 per cent. Government data shows it fell to 3.16 per cent in April from 3.34 per cent in March, remaining within the RBI's tolerance level.

The RBI kept the Gross Domestic Product (GDP) growth projection unchanged at 6.5 per cent in the current financial year.

The central bank also reduced the cash reserve ratio (CRR) by 100 bps and said it will release Rs 2.5 lakh crore of bank funds.