The Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) today decided to reduce the policy repo rate by 50 basis points (bps) to 5.5 per cent. Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25 per cent and the marginal standing facility (MSF) rate and the Bank Rate to 5.75 per cent.
After the reduction of the repo rate by 50 bps, it is expected that all external benchmark lending rates (EBLR) linked to it will decline by a similar margin. It is likely that banks may also reduce their lending rates.
According to RBI Governor Sanjay Malhotra, the decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth. While announcing the decision, the RBI Governor also said that the inflation outlook for FY26 has been revised to 3.7 per cent, from the earlier 4 per cent. The MPC also retained the GDP growth forecast for the current fiscal year at 6.5 per cent, stating that “geopolitical tensions and weather vagaries pose headwinds”.
The next meeting of the MPC is scheduled from August 4 to 6, 2025.