In a decisive move to boost economic momentum, RBI Governor Sanjay Malhotra announced a sharp 50 basis points cut in the repo rate, bringing it down from 6% to 5.5%. With inflation easing to 3.2% &mdash; below the central bank&rsquo;s lower threshold &mdash; the policy stance has been revised from &ldquo;accommodative&rdquo; to &ldquo;neutral.&rdquo;
Lower interest rates are expected to reduce borrowing costs for individuals and businesses, encouraging spending and investment. However, the true impact of the cut will depend on how effectively commercial banks transmit the rate reduction to borrowers.
This is the second significant cut this year, totaling 100 basis points since February. Alongside the rate cut, the RBI lowered its inflation forecast from 4% to 3.7%, citing broad-based price moderation and improved agricultural prospects.
Governor Malhotra highlighted that India continues to be the fastest-growing major economy, backed by strong fundamentals &mdash; including robust corporate and bank balance sheets, a stable external sector, and growing investor confidence. He emphasized the role of demographics, digitization, and domestic demand in shaping India&rsquo;s economic resilience.
The Governor also addressed improvements in the agricultural outlook, with record wheat output and better pulse production projected in the second advance estimates. Strong kharif crop arrivals are expected to support a sustained decline in food inflation. Lower crude oil prices and softened inflation expectations further reinforce a positive outlook.
In addition, the RBI announced a phased 100 basis points reduction in the Cash Reserve Ratio (CRR), to be implemented in four tranches of 25 basis points each on September 6, October 4, November 1, and November 29. This move is aimed at enhancing liquidity in the banking system.
Malhotra concluded by reiterating that India remains a compelling investment destination, offering long-term opportunities driven by a strong economic foundation.&nbsp; Except for the headline, this article has not been edited by the Benefit News editorial team and is published directly from the IANS news feed.

Inflation eases to 3.2% as RBI slashes rate by 50 bps and lowers CRR to boost growth and liquidity

RBI Cuts Repo Rate to 5.5%, Shifts to Neutral Stance

Inflation eases to 3.2% as RBI slashes rate by 50 bps and lowers CRR to boost growth and liquidity

June 6, 2025 | 11:29 IST