### India's Central Bank Takes Bold Action: A 50 Basis Points Rate Cut The Reserve Bank of India (RBI) has made a significant move by cutting its key repo rate by 50 basis points, bringing it down to 5.5%. This decision marks the third consecutive rate cut since February 2025 and comes as a surprise to many economists who anticipated a smaller reduction of 25 basis points. The RBI's action is aimed at stimulating economic growth amid a backdrop of low inflation and a somewhat stabilizing global economic outlook. The central bank also reduced the cash reserve ratio (CRR) for banks, further enhancing liquidity in the financial system [https://www.cnbc.com/2025/06/06/india-rbi-cuts-interest-rates-to-lowest-since-august-2022.html][https://www.reuters.com/world/india/india-cenbank-delivers-larger-than-expected-50-bps-cut-key-rate-2025-06-06]. ### Key Aspects of the RBI's Decision 1. **Rate Cut Details**: - The repo rate has been reduced from 6.0% to 5.5%, a 50 basis points cut, which is the largest in five years [https://www.reuters.com/world/india/india-cenbank-delivers-larger-than-expected-50-bps-cut-key-rate-2025-06-06]. - This is the third consecutive cut, totaling a 100 basis points reduction since February 2025 [https://www.rediff.com/business/report/rbi-cuts-policy-rate-by-50-basis-points-to-55/20250606.htm]. 2. **Economic Context**: - The decision comes amid low inflation rates, which have provided the RBI with the flexibility to focus on growth [https://www.financialexpress.com/policy/economy-rbis-jumbo-rate-cutliquidity-push-experts-say-change-in-stance-indicate-pause-ahead-3870806]. - RBI Governor Sanjay Malhotra noted that the global economic outlook has improved slightly, allowing for this proactive monetary policy adjustment [https://indianexpress.com/article/business/repo-rate-cut-india-economy-rbi-governor-sanjay-malhotra-10051505]. 3. **Impact on Borrowers and Savers**: - Borrowers, particularly those with home loans, are expected to benefit from lower interest rates, while savers may see reduced returns on deposits [https://indianexpress.com/article/business/rbi-mpc-meeting-repo-rate-june-2025-gdp-inflation-10051398]. - The CRR has also been cut by 100 basis points, which will be implemented in four tranches starting in September 2025, releasing significant liquidity into the banking system [https://www.business-standard.com/markets/capital-market-news/rbi-s-crr-cut-by-100-bps-to-be-delivered-in-four-tranches-with-effect-from-september-125060600339_1.html]. ### Supporting Evidence and Data - **Repo Rate Changes**: - Current Repo Rate: **5.5%** (down from 6.0%) [https://www.livemint.com/market/stock-market-news/rbi-cuts-repo-rate-by-50-bps-to-5-50-changes-policy-stance-to-neutral-11749182003155.html]. - Total Rate Cuts Since February: **100 basis points** [https://www.rediff.com/business/report/rbi-cuts-policy-rate-by-50-basis-points-to-55/20250606.htm]. - **CRR Reduction**: - Current CRR: **3.0%** (down from 4.0%) [https://www.business-standard.com/markets/capital-market-news/rbi-cuts-repo-rate-by-50bps-to-5-50-crr-by-100-bps-125060600238_1.html]. - Expected liquidity release: Approximately **₹2.5 lakh crore** by December 2025 [https://www.business-standard.com/markets/capital-market-news/rbi-s-crr-cut-by-100-bps-to-be-delivered-in-four-tranches-with-effect-from-september-125060600339_1.html]. ### Conclusion: A Strategic Move for Economic Growth In summary, the RBI's decision to cut the repo rate by 50 basis points is a strategic response to current economic conditions, aiming to bolster growth while managing inflation. The shift to a neutral policy stance indicates a careful balancing act as the central bank navigates the complexities of both domestic and global economic landscapes. 1. **Repo Rate Cut**: Reduced to **5.5%** to stimulate growth. 2. **CRR Adjustment**: Cut by **100 basis points** to enhance liquidity. 3. **Economic Outlook**: Aimed at supporting borrowers while managing inflation risks. This proactive approach reflects the RBI's commitment to fostering a conducive environment for economic recovery and growth [https://www.financialexpress.com/policy/economy-rbis-jumbo-rate-cutliquidity-push-experts-say-change-in-stance-indicate-pause-ahead-3870806][https://www.business-standard.com/markets/capital-market-news/rbi-cuts-repo-rate-by-50bps-to-5-50-crr-by-100-bps-125060600238_1.html].