The Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) has reduced the repo rate by 50 basis points to 5.50%, effective immediately. The decision was made during the MPC’s 55th meeting held from June 4 to 6, 2025, under the chairmanship of Governor Sanjay Malhotra. The committee also adjusted the standing deposit facility (SDF) rate to 5.25% and the marginal standing facility (MSF) and Bank Rate to 5.75%.
This move comes as inflation has come down sharply over the past few months. The consumer price index (CPI) inflation fell to 3.2% in April 2025, the lowest in nearly six years. Inflation for the year 2025–26 is now expected to average 3.7%, below the earlier forecast of 4.0%.
The rate cut is expected to make loans cheaper, increase spending, and boost investment. This is also good news for India’s fintech sector, which depends on low borrowing costs and strong digital payment activity. Sectors such as digital lending, payments, and consumer finance may see more activity as people and businesses get easier access to funds.
India’s economy also grew by 7.4% in the last quarter of 2024–25, and the overall GDP growth for 2025–26 is projected at 6.5%. This is supported by strong rural demand, rising private investment, better business conditions, and continued growth in the services sector.
The RBI has shifted its policy stance from “accommodative” to “neutral,” meaning it will now closely monitor future data before making further changes. The central bank also said that global risks, such as trade tensions and changes in commodity prices, will be important to watch.
The next MPC meeting is scheduled for August 4–6, 2025, when the RBI will review economic conditions again. For now, the focus is on maintaining low inflation while supporting steady economic growth.
