RBI Cuts Repo Rate by 50 Basis Points for Third Consecutive Time

Reserve Bank of India (RBI) Repo Rate Cut: The Reserve Bank of India (RBI) has reduced the repo rate by 50 basis points (0.5%), bringing it down from 6% to 5.5%.

The Reserve Bank of India (RBI)’s Monetary Policy Committee (MPC) announced a significant decision today, 6 June 2025, following its meeting. RBI Governor Sanjay Malhotra declared a 50 basis point (0.5%) reduction in the repo rate, bringing it down from 6% to 5.5%. This marks the third repo rate cut in 2025 and is expected to lead to lower EMIs for home loans, auto loans, and other debts.

Reasons Behind the Decision

This RBI cut is part of a strategy to combat low inflation and boost economic growth. In April 2025, the retail inflation rate reached a six-year low of 3.16%, significantly below the RBI’s target of 4%. Coupled with global economic uncertainties and recessionary fears, the RBI took this step to support the economy.

Impact of the Decision

Cheaper Loans: The repo rate cut will make borrowing cheaper for banks from the RBI, potentially resulting in lower home, auto, and personal loan interest rates for customers.

EMI Relief: Individuals with floating-rate loans can expect a reduction in their EMIs.

Boost to Economic Growth: Cheaper credit is likely to stimulate business and consumer spending, benefiting sectors such as MSMEs, real estate, and automobiles.

Banks Already Preparing: Following a total repo rate reduction of 100 basis points since February 2025, several banks have already begun lowering their interest rates.

Policy Stance Shift: The RBI has changed its policy stance from ‘accommodative’ to ‘neutral’, suggesting that future rate cuts may be more limited.

#WATCH | RBI Governor Sanjay Malhotra says, “… The MPC decided to reduce the policy Repo Rate under the liquidity adjustment facility by 50 basis points to 5.5%. This will be with immediate effect. Consequently, the Standing Deposit Facility (STF) Rate shall stand adjusted to… pic.twitter.com/siUUlBmcrG

— ANI (@ANI) June 6, 2025

Relief for the Public

This decision offers relief to the general public, particularly those struggling with loan EMIs. The focus now shifts to how quickly banks pass on these benefits to their customers.