The decision, announced at the conclusion of the Monetary Policy Committee’s (MPC) 55th meeting held from June 4 to 6, 2025, was driven by easing inflation and a stable growth outlook.
With the rate cut coming into effect immediately, the standing deposit facility (SDF) rate now stands at 5.25%, while the marginal standing facility (MSF) rate and the Bank Rate are adjusted to 5.75%.
This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4% within a band of +/- 2%, while supporting growth.
To ensure durable liquidity, the central bank also announced a 100 basis points reduction in the cash reserve ratio (CRR) to 3% of net demand and time liabilities (NDTL). The cut will be implemented in four equal tranches of 25 bps each, starting from the fortnights beginning September 6, October 4, November 1, and November 29, 2025. By December, the CRR cut is expected to infuse approximately Rs 2.5 lakh crore of primary liquidity into the banking system.
The RBI maintained its real GDP growth projection for FY26 at 6.5%, with quarterly growth seen at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4.
On the inflation front, the RBI revised its forecast downward to 3.7% for FY26 from the earlier estimate of 4%. Quarterly projections suggest CPI inflation at 2.9% in Q1, 3.4% in Q2, 3.9% in Q3, and 4.4% in Q4.
The RBI cited broad-based moderation in inflation over the past six months, with headline CPI now well below target. It noted that both food and core inflation are expected to remain soft, helped by easing global commodity prices amid a global growth slowdown.
Looking ahead, the MPC emphasized a data-dependent approach, stating it will closely monitor evolving domestic and global conditions to guide future policy moves.
The minutes of the MPC meeting will be released on June 20, and the next policy meeting is scheduled from August 4 to 6, 2025.
Following the policy announcement, the Nifty Bank index rose 1.16% to 56,405.60, while the benchmark Nifty 50 inched up 0.65% to 24,912.50.
IDFC First Bank (up 3.44%), Axis Bank (up 2.49%), Bank of Baroda (up 2.01%), Punjab National Bank (up 1.86%), Kotak Mahindra Bank (up 1.72%), Federal Bank (up 1.70%), AU Small Finance Bank (up 1.53%), State Bank of India (up 1.15%), HDFC Bank (up 1.09%), IndusInd Bank (up 1.08%), Canara Bank (up 0.45%), ICICI Bank (up 0.36%) surged.