RBI pegs repo rate 50 bps lower at 5.50% in bid to drive growth
By Unnikrishnan | 06 Jun 2025
The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) has announced a 50 basis point reduction in the Reserve Bank’s policy repo rate, on the basis of its assessment of the current and evolving macroeconomic situation in the country.
Accordingly, the new repo rate stands reduced to 5.50 per cent while the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) will stand adjusted to 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.75 per cent, with immediate effect.
An RBI release said, despite the reduction in the repo rate, the central bank stood committed to achieving the medium-term target for consumer price inflation of 4 per cent, within a band of +/- 2 per cent, while also supporting economic growth.
The Indian economy is expected to have grown at a rate of 7.4 per cent in the last quarter of the previous financial year (2024-25) against the 6.4 per cent growth recorded in in the previous quarter.
Real gross value added (GVA) rose by 6.8 per cent in Q4 of 2024-25.
For the full financial year 2024-25, India’s real GDP is estimated to have grown by 6.5 per cent, while real GVA growth is estimated at 6.4 per cent.
Market volatility has eased with equity markets staging a recovery, while the dollar index and crude oil prices have softened, although gold prices remain high.
RBI expects the economy to keep growth momentum in 2025-26, gaining from increasing private consumption and improvement in fixed capital formation.
A combination of sustained rural economic activity, continued expansion in services sector and overall improvement in investment activity and capacity utilisation, increased government spending and a benign inflation rate will support a revival in the country’s economic growth, according to RBI.
There is however, some uncertainty on the global economic outlook, which although has shown some change in the wake of the US change of stance on across-the-board tariff imposts and restart of trade negotiations. These, however, have not brightened global growth prospects. In fact, RBI said, multeral agencies have revised global growth and trade projections.
RBI expects India’s real GDP growth for 2025-26 to be around 6.5 per cent, with first quarter growth at 6.5 per cent, Q2 growth of 6.7 per cent, Q3 growth of 6.6 per cent, and Q4 growth of 6.3 per cent.
