{"id":152119,"date":"2025-06-06T16:46:18","date_gmt":"2025-06-06T11:16:18","guid":{"rendered":"https:\/\/www.practicemock.com\/blog\/?p=152119"},"modified":"2025-06-06T16:51:13","modified_gmt":"2025-06-06T11:21:13","slug":"rbis-monetary-policy-decision","status":"publish","type":"post","link":"https:\/\/www.practicemock.com\/blog\/rbis-monetary-policy-decision\/","title":{"rendered":"RBI’s Monetary Policy Decision: CRR, Repo Rate Cut By 50 Bps To 5.5% Cuts, Know Latest Changes"},"content":{"rendered":"\n

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Home<\/a><\/span> \u00bb Regulatory<\/a><\/span> \u00bb RBI Monetary Policy: CRR, Repo Rate See Sharp Cuts, Know Latest Changes<\/span><\/span><\/div>\n\n\n

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On June 6, 2025, the Reserve Bank of India (RBI) implemented a significant monetary policy adjustment by reducing the benchmark repo rate by 50 basis points to 5.5%. This is the third consecutive rate cut in 2025, taking the total reduction to 100 basis points since February. Additionally, the RBI reduced the cash reserve ratio (CRR) by 100 basis points to 3% to increase liquidity in the banking system.<\/p>\n\n\n\n

RBI\u2019s Monetary Policy Decision <\/h2>\n\n\n\n

The Reserve Bank of India of India, in its Annual Report for FY 2024-25, notes that the average headline inflation in FY 2024-25 moderated to 4.6% from 5.4% in the previous year. It is interesting to see that the global headline inflation has been consistently on the rise since October 2024. However, India\u2019s headline inflation has been on a steep decline in the same period. In fact, India\u2019s headline inflation rates were 3.79%, 3.25% and 2.92% in February, March and April, respectively, extending the decline shown in the chart.<\/p>\n\n\n\n

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Source:<\/strong> World Economic Outlook (IMF) \u2013 April 2025, RBI Annual Report 2024-25<\/p>\n\n\n\n

The repo rate is mostly used to regulate the credit supply in the economy. If inflation is on the rise, the central bank increases the repo rate to limit the money supply and vice versa. <\/p>\n\n\n\n

In light of the above-mentioned statistics, the RBI, in its Monetary Policy Committee Meeting (4-6 June 2025), decided to cut the policy repo rate by 50 basis points to 5.5%. This is the third time in this calendar year that the rate cut has taken place. In April, the CPI was 2.92%, very close to the lower band of the RBI’s inflation targeting framework. That’s why, the RBI has gone with a 50-basis-point reduction this time to boost economic activity.<\/p>\n\n\n\n

Highlights of the RBI monetary policy decision<\/h2>\n\n\n\n

Repo rate reduction:<\/strong> The repo rate now stands at 5.5%. The move was decided majority within the Monetary Policy Committee (MPC), with one member advocating a smaller reduction of 25 basis points.<\/p>\n\n\n\n

CRR cut: <\/strong>The CRR has been reduced from 4% to 3%, to be implemented. The measure is expected to release about \u20b92.5 lakh crore into the banking system by November 2025.<\/p>\n\n\n\n

Change in policy stance: <\/strong>The RBI has changed its monetary policy stance from ‘accommodative’ to ‘neutral’, indicating a more balanced approach in future policy decisions.
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Rationale Behind the Policy Changes<\/h2>\n\n\n\n

The RBI’s decision is influenced by several economic indicators:<\/p>\n\n\n\n