RBI Slashes Repo Rate and CRR, Adopts Neutral Stance Amid Cooling Inflation

In a major announcement from the Reserve Bank of India (RBI), the central bank has cut the repo rate by 50 basis points (bps) and the Cash Reserve Ratio (CRR) by 100 bps, marking a significant step towards boosting liquidity and supporting economic growth. This decision came after the Monetary Policy Committee’s (MPC) bi-monthly review, which started on June 4 and concluded today, June 6.

The announcement was made during the scheduled RBI monetary policy press briefing, which was addressed by RBI Governor Sanjay Malhotra. The press conference was streamed live on the central bank’s official YouTube channel as well as on Moneycontrol.com.

Shift to Neutral Stance Signals Balanced Outlook

Along with the rate cuts, the RBI has also changed its monetary policy stance from ‘accommodative’ to ‘neutral’, suggesting a more balanced approach going forward. This signals that the central bank is keeping all options open depending on future economic data, especially inflation trends and growth momentum.

“The RBI’s neutral stance reflects a cautious optimism as inflation begins to settle within acceptable levels,” noted a market analyst.

Inflation Target Set at 3.7%

Another key takeaway from the policy update is the RBI’s inflation target, which has now been set at 3.7%. This is in response to recent data showing a cooling of consumer price inflation, which stood at 3.16% in April. With inflation well within the RBI’s comfort zone, the central bank has more room to maneuver and provide stimulus through rate cuts.

Market Awaits Detailed Commentary

While the repo and CRR cuts were higher than many expected—a 25 bps repo rate cut had been widely anticipated—the RBI’s move signals its commitment to support the economy amid evolving global and domestic conditions. Investors and analysts are now closely watching the detailed commentary from the RBI to understand future policy directions.

“The 50 bps repo rate cut is a bold move,” said a financial expert. “It shows the RBI’s willingness to act decisively when conditions allow.”

What This Means for Borrowers and the Economy

The reduction in repo rate, which is the rate at which the RBI lends money to commercial banks, is likely to lead to lower interest rates for home loans, auto loans, and other types of borrowings. The CRR cut will also inject additional liquidity into the banking system, allowing banks to lend more freely.

This could boost spending, encourage investments, and ultimately support overall economic growth.

Conclusion

The RBI’s latest policy decision, which includes a 50 bps repo rate cut, a 100 bps CRR cut, and a neutral monetary stance, comes as a welcome move amid easing inflation pressures. With an inflation target of 3.7%, the central bank appears confident in its assessment of the current economic environment while keeping room for flexibility in the future.

As always, the market will be keenly observing the RBI’s tone and future data to gauge the next steps in India’s monetary policy journey.