RBI’s Bold Push for Growth: From Caution to Confidence
FinTech BizNews Service
Mumbai, June 6, 2025: The Monetary Policy Committee (MPC) held its 55th meeting from June 4 to 6, 2025 under the chairmanship of Shri Sanjay Malhotra, Governor, Reserve Bank of India. After assessing the current and evolving macroeconomic situation, the MPC voted to reduce the policy repo rate by 50 basis points (bps) to 5.50 per cent with immediate effect.
Here are representative voices from the banking sector on the RBI’s MPC decisions announced today:
Vikas Garg- Head of Fixed Income Invesco Mutual fund
“The MPC has frontloaded economic growth support measures with a substantial policy rate cut of 50 bps and a phased CRR cut of 100 bps, far exceeding market expectations. However, in a balancing move, the policy stance has been changed back to “Neutral” from “Accommodative,” after having shifted in the previous April policy. FY26 inflation projections have been moderated to 3.7% from the earlier 4.0%, citing benign food as well as core inflation. Growth projections have been maintained at 6.5% for FY26, although downside risks persist amidst global uncertainty. With the Neutral stance, future rate cuts will be data-dependent, based on growth-inflation dynamics. We believe that the current policy rate cut, along with the substantial liquidity surplus from the CRR cut, will gradually drive yields lower, with a curve steepening bias.”
Siddarth Bhamre, Head of Research, Asit C Mehta Investment Interrmediates (A Pantomath Group Company):
“Tariff war has weakened sentiments and can lead to lower global growth rate. In order to boost growth, RBI has front loaded the rate cut by decreasing repo rate by 50 bps. Also, to further enhance the liquidity into the banking system, CRR will be reduced by 100 bps but between September and November 2025.
Interestingly, central bank has used most of its arsenals in its first 3 policies and categorically stated that beyond this it’s very little the MPC can do to support the growth and changed its stance to neutral from accommodative.
RBI has emphasized that India’s macro-economic environment is on a strong footing with its 5x3x3 matrix of fundamentals but still took a bold step of cutting 50 bps by highlighting challenges of global spillovers. It’s interesting how despite front loading the rate reduction and infusing additional 2.5 lakh cr in banking system, FY26 GDP growth didn’t receive an upward revision and is maintained at 6.5%.
This rate cut and its faster transmission coupled with government policies will act as a shock absorber in an adverse global economic environment and may act as a cushion to support domestic GDP growth.”
Nilesh Shah, Managing Director, Kotak Mahindra AMC:
The RBI after nudges in the initial power play overs changed gears for big hits. A jumbo Repo Rate cut of 50 bps and a CRR cut of 100 bps is way ahead of market expectations.
Both the bond and equity market will be positively surprised by the front loading and will overcome the prudent measure of change in stance.
President Trump may request US Fed to follow the RBI
Krishna Appala, Fund Manager, Capitalmind PMS:
The RBI’s June 2025 policy signals a decisive tilt toward growth. A sharp 50 bps repo rate cut, coupled with a 100 bps reduction in the CRR, is set to inject 2.5 lakh Cr of liquidity into the banking system — a meaningful move in magnitude and intent. These actions come as inflation prints hit multi-year lows, with FY26 CPI now projected at 3.7%, down from 4%. The central bank’s growth optimism is underlined by a steady 6.5% GDP forecast and expectations of a strong rural economy aided by an above-normal monsoon. India’s services exports remain robust, and external balances are healthy with forex reserves at $690 billion and a contained current account deficit. Notably, there has been no major movement in the USDINR, and the 10-year G-Sec yield remains soft at 6.19%, reflecting bond market confidence.
Rate-sensitive sectors stand to benefit — especially financials, real estate, and manufacturing — though the transmission may be slower, given muted credit offtake. Despite abundant liquidity, both corporate borrowing and bank lending remain subdued. Meanwhile, debt mutual funds have delivered strong returns over the past year, and falling rates may challenge fixed deposit yields going forward. The RBI’s change in stance to ‘neutral’ signals a pause in further easing. While another rate cut may still be on the table, it’s likely the central bank will now wait and watch. Overall, this policy reinforces India’s macro stability while attempting to reignite demand in a measured, credible way.
Gaurav Garg, Lemonn Markets Desk:
The RBI’s bold 50 bps rate cut and a 100 bps CRR reduction signal a decisive pivot towards growth. With inflation cooling to multi-year lows and liquidity already in surplus, the front-loading of cuts reflects the central bank’s commitment to supporting India’s economic momentum. While the stance has shifted to neutral, the tone remains growth-oriented—offering much-needed relief to borrowers and a boost to sentiment across markets. The RBI appears confident in balancing growth aspirations with its inflation mandate.
The market responded swiftly and positively, staging a sharp intraday rally. Interest rate-sensitive sectors such as Auto, Realty, and Banking led the charge, with investors cheering the prospect of lower borrowing costs, improved credit flow, and a supportive policy environment. The broad-based gains reflect renewed confidence in the growth outlook and optimism about stronger corporate earnings in the months ahead.
Raghvendra Nath, MD, Ladderup Asset Managers:
With prices continuing to ease, RBI has cut the repo rate by 50 basis points in a move aimed at supporting the current macroeconomic momentum. This is twice the reduction that most economists had anticipated. While India’s real GDP growth forecast for FY26 remained at 6.5%, primarily due to geopolitical uncertainties affecting trade, inflation is expected to ease further to 3.7%, supported by early start of kharif season. Additionally, the RBI’s decision to gradually reduce the CRR in four equal tranches of 25 basis points over this year is likely to enhance liquidity in the system and lower the cost of funds for banks leading to lowering cost for borrowers and thus support private investment and domestic consumption.
Abhishek Bisen, Head-Fixed Income, Kotak Mahindra AMC:
The RBI finally Goes for ‘Whatever it takes’ moment for India with the confidence of keeping inflation within target and aspiration of growing higher towards Viksit Bharat, RBI’s Monetary Policy Committee (MPC) has front loaded the rate cut with reduction in repo rate by 50 bps (with 5:1 vote) and making the repo at 5.5%. RBI has also decided to cut the Cash Reserve Ratio (CRR) requirement for banks by 1% reducing it to 3% in four tranches starting from 6th September 25. This will increase the banking system liquidity by ~Rs 2.5 lakh crores and ensure sufficient liquidity in the system in near future also. However, the MPC changed the stance to neutral. The RBI has reduced its projection for CPI inflation to 3.7% (from 4% earlier) and have kept the Indian GDP growth same at 6.5% for FY26. With the stance changes to neutral and RBI Governor statement of front loading of rate cut in this policy, we expect further rate action to be data dependent, however, we believe there is scope for more 25 bps rate cut in this cycle, though timing of cut is uncertain. Headwinds continue to be from global variables with uncertainty of US tariffs and tensed geo political situation in parts of the world.
Kaustubh Gupta, Co-Head Fixed Income, Aditya Birla Sun Life AMC Ltd.
With the RBI’s jumbo 50-bps repo rate cut and 100-bps CRR cut, policy easing has been front loaded. We view the policy as growth supportive and stimulative along with an indication of a clear resolve by policy makers to push for growth in an uncertain global environment. The governor also said that while growth is decent, aspirational growth in the 7-8% range.
Mahendra Kumar Jajoo, CIO – Fixed Income, Mirae Asset Investment Managers (India):
“RBI delivered much more than market expectations, with a 50bps cut in repo rate and a full 100bps reduction in CRR , spread over four instalments beginning Sep 6. Remarkably, for the first time since the start of inflation targeting regime, the full year projection for inflation is below the target range of 4% with 2% band, at 3.7%. However, the stance was changed to neutral, suggesting that RBI has upfronted the entire accommodation room at a quick pace. Accordingly, the market participants have a good assessment of the terminal policy rate in current cycle. Accordingly, 10Y benchmark bond yield which has already inched down to around 6.20%, remained largely flat. Most reaction was seen in the shorter end of the curve with money market rates easing further extending to 1-3 year corporate bond segment. Going forward, it is expected that longer bond yields remain range bound, the money market rates may ease further.”
Siddharth Chaudhary, Head- Fixed Income, Bajaj Finserv AMC:
“The Monetary Policy Committee (MPC) delivered surprises on three fronts. First, it implemented a 50-basis point rate cut, exceeding market expectations of a 25-basis point reduction. This move aims to support the economy amid rising trade uncertainties and easing inflationary pressures. Second, the MPC shifted its monetary policy stance from “accommodative” to “neutral”, with the Governor emphasizing that future actions will be guided by incoming data. Third, a 100 bps CRR cut.
Prior to the policy announcement, we had highlighted a strong likelihood of a 50-basis point cut, noting that any further easing would depend on a significant deterioration in global growth and trade conditions. With today’s decision, short- to medium-term bonds are expected to perform well, supported by a substantial liquidity surplus following a 100-basis point cut in the Cash Reserve Ratio (CRR). Core liquidity surplus is now projected to be around INR 8 trillion. However, as market expectations approach the terminal rate, profit booking is evident in longer-term bonds.
It is also worth noting that the pre-policy real interest rate of 2% was relatively high, especially in the context of heightened global uncertainties. Given the domestic growth-inflation dynamics, a more accommodative stance was justified to sustain economic momentum. With the FY26 inflation forecast revised downward to 3.7% from 4%, the real interest rate now stands at 1.8%, which remains elevated. Going forward, further rate cuts will only be feasible if inflation projections decline further in upcoming policy reviews.”
