RBI cuts CRR by a steep 1 pc, shifts policy stance to neutral

The Reserve Bank of India (RBI) has decided to cut the repo rate by 50 basis points to 5.5 per cent from 6 per cent earlier. This is the RBI’s third consecutive repo rate cut as tepid inflation allowed the bank to focus on spurring economic growth. Cash Reserve Ratio (CRR) has also been slashed by 100 basis points while Marginal Standing Facility (MSF) and Bank rate stand adjusted at 5.75. The Central Bank, in its bi-monthly monetary policy meeting announced on Friday, has shifted its policy stance from ‘accommodative’ to ‘neutral’.  RBI Governor Sanjay Malhotra said  the central bank was responding to the sharp moderation in inflation, which has now fallen to 3.2 per cent — below the RBI’s lower tolerance band of 4 per cent. Malhotra highlighted that the Indian economy remains on a strong footing. Corporate, bank, and government balance sheets are healthy, and the external sector is stable. He said India continues to be the fastest-growing major economy and offers attractive opportunities for both domestic and international investors.

Watch: RBI Governor Sanjay Malhotra says, "In our vision of a Viksit Bharat by 2047, I now turn to the decisions of the Monetary Policy Committee. The Monetary Policy Committee met on the 4th, 5th and 6th of June, that is, today, to deliberate and decide on the policy repo rate.… pic.twitter.com/ajdbdXRgD4

— IANS (@ians_india) June 6, 2025

However, the Governor stressed that the success of the rate cut would depend on timely and effective transmission by commercial banks to consumers. RBI’s inflation outlook has been revised downward from 4 per cent to 3.7 per cent. The Governor said the moderation in inflation is broad-based, and the alignment with the RBI’s target band appears durable. He also noted that food inflation is likely to soften further on the back of a strong rabi harvest and record wheat and pulses production. Falling crude oil prices have also contributed to the positive inflation outlook, while anchoring inflation expectations going forward.

(Business Correspondent)