21-Jun-2025 12:00 PM
On 20th June 2025, the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) announced a repo rate cut of 0.50% (50 basis points).
This move surprised the market, as most analysts expected only a 0.25% cut.
| Factor | Change |
|---|---|
| 🔽 Repo Rate | Cut by 50 bps (Now: 5.75%) |
| 💰 CRR/SLR Relaxation | Banks now have more room to lend |
| 📉 Policy Tone | Shifted from “Accommodative” to “Neutral” |
🧾 Meaning: RBI will now be more cautious about changing interest rates further.
| Objective | Explanation |
|---|---|
| ✅ Boosting Consumption & Investment | Lower rates → cheaper loans → more spending & investment |
| 📊 Inflation | CPI for May 2025 was just 2.82%, well below the 4% target |
| 🤔 Economist Viewpoint | “A 25bps cut would’ve been better,” said Sarga Bhattacharya |
Understand RBI’s autonomy and accountability
Core debate: Growth vs. Inflation
This decision was made amid global economic uncertainties
RBI has sent a strong message:
➡️ It wants to revive growth — but without triggering inflation.
This step has been taken at a time when inflation is low but growth is sluggish — making it a calculated risk.
“RBI’s 50 bps repo rate cut: Is it beneficial or risky for India’s economic situation?”
Question: What was India’s CPI inflation rate in May 2025?
a) 3.5%
b) 2.82% ✅
c) 4.25%
d) 5.1%
🔁 Mnemonic:
“RBI used a Neutral Coolant on an Overheating Economy”
➡️ When growth was cooling but inflation was controlled, RBI took a balanced step — rate cut with caution about future easing.
📌 Remember:
Repo Cut → Cheaper loans → Rise in investment
Inflation < Target → Room for rate cut exists
Do you think RBI’s bold and unexpected move is a wise decision, or is it a risky gamble?
💬 Comment below or reflect in your Mains notes!
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