Good news! RBI cuts repo rates by 50 bps to 5.5%, announces governor Sanjay Malhotra after MPC meet

A lowering of the repo rate leads to reduction in lending rates by banks, which, in turn, brings down EMIs for retail and corporate borrowers.

RBI cut rates by 50 bps to 5.5%. After MPC central bank decided to reduce the repo rate by 50 bps to 5.50%. Now SDF is at 5.25% and MSF at 5.75%.The RBI’s rate-setting panel Monetary Policy Committee (MPC) started its three-day deliberations on Wednesday.

Inflation outlook for FY26 revised downwards to 3.7 pc, from 4 pc. After reducing repo by 100 bps in quick succession, monetary policy left with limited space to support growth.

Following the rate cut, the key policy rate eased to a three-year low of 5.5 per cent, providing relief to home, auto and corporate loans borrowers.

This is the lowest repo rate in three years.

The repo rate — the rate at which banks borrow funds from the RBI — had last stood at 5.40 per cent on August 5, 2022. After a detailed assessment of the evolving macroeconomic and financial development, as well as the economic outlook, the Monetary Policy Committee (MPC) decided to reduce the repo rate by 50 basis points, RBI Governor Sanjay Malhotra said.

Since February 2025, the RBI has reduced the policy rate by 100 basis points. In its previous policy review in April, it had also trimmed the repo rate by 25 basis points to 6 per cent.

After reducing repo by 100 bps in quick succession, monetary policy is left with limited space to support growth, he added. This is the first time since Covid-19 that the RBI has passed on three consecutive rate cuts, beginning February 2020.

Malhotra, however, retained the GDP forecast for the current fiscal at 6.5 per cent. The inflation projection was lowered to 3.7 per cent from the earlier estimate of 4 per cent, supported by expectations of a good monsoon.

The MPC felt that the front-loading of the rate cuts would help growth, he added.

RBI Guv Sanjay Malhotra said, ”Indian economy presents strength, stability and opportunity amid global concerns. Indian economy offers immense opportunities to investors. Govt’s continued thrust on capex should help revive investment activity.from now MPC will carefully assess income data, evolving outlook to chart out future policy.”

The central bank reduced the key benchmark lending rate (repo) by 25 bps points each in February and April this year on the recommendations of the governor-headed MPC.

The MPC consists of three members from the RBI and three external members appointed by the government. RBI members are: Governor Sanjay Malhotra, Deputy Governor M Rajeshwar Rao, and Executive Director Rajiv Ranjan.

(With Inputs From PTI)