RBI June 2025 Monetary Policy Update Newsletter 

Introduction 

On June 6, 2025, the Reserve Bank of India (RBI) announced its latest monetary policy following the 55th meeting of its Monetary Policy Committee (MPC). This policy update marks the third consecutive rate cut in 2025 and signals a strategic shift in the RBI’s approach to managing inflation and supporting economic growth. 

Explanation (Key Points) 

• Repo Rate Cut: The MPC decided in a 5:1 vote to reduce the policy repo rate by 50 basis points, bringing it down to 5.50%. This is a sharper cut than the previous two 25 basis point reductions earlier in the year. 

• Monetary Policy Stance: The stance was changed from accommodative to neutral, indicating limited room for further easing after this significant cut. This shift surprised market analysts and suggests RBI’s cautious approach moving forward. 

• Inflation Outlook: The RBI noted a significant easing in inflation pressures, with consumer price index (CPI) inflation projected to align with the medium-term target of 4% within a band of +/- 2%. The inflation forecast for the fiscal year was revised downward from 4.0% to 3.7%, supported by strong harvests and an early monsoon. 

• Growth Projections: Real GDP growth for 2025-26 is projected at 6.5%, with quarterly growth estimates ranging between 6.3% and 6.7%. The RBI highlighted balanced risks to growth, factoring in both positive and negative economic conditions. 

• Liquidity Management: RBI reaffirmed its commitment to ensuring adequate liquidity in the banking system, supported by a 100-basis points reduction in the Cash Reserve Ratio [CRR]. 

• Impact on Lending Rates: Following the repo rate cut, several major banks have reduced their home loan interest rates, benefiting borrowers with floating rate loans linked to the repo rate. For example, Punjab National Bank and Bank of India cut their lending rates by 50 basis points effective early June 2025. 

Conclusion 

The RBI’s June 2025 monetary policy reflects a balanced approach to sustaining growth while keeping inflation under control. The significant repo rate cut aims to boost economic momentum, yet the shift to a neutral stance signals caution amid global uncertainties and domestic challenges. The easing of inflation and positive growth outlook provide a supportive environment for borrowers and businesses, although the RBI’s limited space for further rate cuts suggests close monitoring of economic developments ahead. The next MPC meeting is scheduled for August 6–8, 2025, where the RBI will reassess the economic landscape and policy direction.