The Reserve Bank of India (RBI) concluded its three-day Monetary Policy Committee (MPC) meeting for FY2025-26 with several major announcements.
RBI Governor Sanjay Malhotra announced a 0.50% cut in the repo rate, bringing it down from 6.00% to 5.50%.
This is great news for borrowers, as it will make loans cheaper. Apart from this, the governor made several other important statements. Here are the key highlights from the meeting.
Top 10 Highlights from the RBI MPC Meeting
Repo rate cut by 50 basis points (bps) to 5.5%
Cash Reserve Ratio (CRR) cut by 1% to 3% to boost liquidity
RBI changed its policy stance from “accommodative” to “neutral”
Inflation has dropped significantly in the last 6 months, now below 4%
Consumer Price Index (CPI) target for FY26 reduced from 4% to 3.7%
Rate cut expected to boost economic growth
GDP forecast for FY26 retained at 6.5%
Normal monsoon expected to result in a good crop
India’s economy remains resilient despite global uncertainties
Liquidity improved as the system moved from shortage to surplus through Open Market Operations (OMO)
Shift in RBI Policy Stance
Governor Malhotra explained that the interest rate cut is aimed at supporting growth, especially in a global environment where uncertainty continues and many countries are revising down growth forecasts.
He emphasized that India’s economy remains strong and attractive for both domestic and foreign investors.
The RBI’s stance has now shifted from accommodative to neutral, and the central bank will continue to assess economic data carefully. Agricultural and industrial production are showing steady growth.
MSF Rate Also Reduced
The Marginal Standing Facility (MSF) rate has been reduced from 6.25% to 5.75%. The governor also noted:
Inflation has significantly eased in the past six months
Private consumption and urban demand have improved
Investments and the services sector are seeing strong growth
Delays in global tariff hikes have reduced global risks, though challenges for central banks remain
CRR Reduced to 3% in Phases
The Cash Reserve Ratio (CRR) has been cut from 4% to 3%, which will reduce the cost of funds for banks and release liquidity worth Rs 2.5 lakh crore into the system. The CRR cut will happen in four phases:
First cut: September 6
Second cut: October 4
Third cut: November 1
Fourth cut: November 29
Each phase will reduce CRR by 0.25%.
Note: CRR is the percentage of total deposits that banks must keep with the RBI. Lowering it increases the money banks can lend.
History of CRR Rate Changes
March 2020: Cut from 4% to 3%
Feb 2021: Raised to 3.5%
June 2021: Raised to 4%
May 2022: Raised to 4.5%
Dec 2024: Cut to 4%
June 2025: Cut to 3%
No changes made between May 2020 and April 2025
GDP Growth Forecast for FY26
The RBI maintained its GDP growth forecast for FY26 at 6.5%, with quarterly estimates as follows:
Q1: 6.5%
Q2: 6.7%
Q3: 6.6%
Q4: 6.3%
CPI Inflation Forecast Updated
The inflation (CPI) estimates for FY26 have been revised:
| Period | Earlier Estimate | Revised Estimate |
|---|---|---|
| FY26 | 4.0% | 3.7% |
| Q1 FY26 | 3.6% | 2.9% |
| Q2 FY26 | 3.9% | 3.4% |
| Q3 FY26 | 3.8% | 3.9% |
| Q4 FY26 | 4.4% | 4.4% |
In summary, the RBI’s latest policy decisions aim to support growth by making borrowing cheaper, increasing liquidity, and keeping inflation in check.
The Indian economy appears strong, with positive signs in consumption, investment, and agriculture.
