Big news from the Reserve Bank of India! Governor Sanjay Malhotra just announced a significant shift in monetary policy. The central bank has slashed its key policy repo rate by a solid 50 basis points, bringing it down to 5.5 percent right away. What’s more, they’ve pivoted their stance from ‘accommodative’ to ‘neutral’ – a notable change.
Malhotra also detailed the other key rates: the standing deposit facility (STF) now sits at 5.25 percent, while both the marginal standing facility (MSF) rate and the bank rate are set at 5.75 percent.
The decision didn’t come lightly. The Monetary Policy Committee (MPC) had their big meeting on June 4th, 5th, and 6th, poring over the latest economic and financial developments and trying to figure out the best way forward for India’s economy. And that’s where they landed on the 50 bps cut, settling the repo rate at 5.5 percent. “With immediate effect,” the RBI boss emphasized.
Malhotra highlighted the backdrop to this decision: a promising start to the monsoon season here in India, even as the global economic picture remains pretty shaky. He also pointed out that after back-to-back repo rate cuts totaling 100 basis points recently, the central bank was running out of room to simply keep cutting rates to boost growth.
This move is great news for homebuyers, as it’s widely expected to bring down home loan rates, offering some much-needed relief. Reactions poured in swiftly. Sanjeev Sanyal, for instance, took to X (formerly Twitter) to simply say: “Excellent move.”
Gurmeet Chadha, who heads Compcircle as managing director and CIO, applauded the decision. He sees the repo rate cut and the shift to a neutral stance as a “positive and proactive approach” from both the RBI and the MPC. Chadha, always vocal, shared more of his thoughts on X, noting, “RBI governor starts with good start to monsoon and global trade uncertainty.. Cuts 50 bps and also changes stance to neutral. I like this positive and proactive approach by RBI and MPC… transmission takes time Great call. RBI by far is the best central banker in the world.” Strong words of praise there!
It’s worth remembering that just back in April, the central bank had cut the repo rate by a smaller 25 bps, bringing it to 6 percent. Back then, they actually shifted their stance the other way, from ‘neutral’ to ‘accommodative’.
