RBI cuts repo to 5.5% in biggest drop since 2020
What's the story
The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC), led by Governor Sanjay Malhotra, has cut the repo rate by a whopping 50 basis points (bps) to 5.5%.
This is the third consecutive reduction this year, following earlier cuts of 25 bps each in February and April. The rate cut is also the largest since May 2020.
The decision comes amid a decline in retail inflation and is expected to make loans cheaper for borrowers across sectors.
Rate adjustment
Decision based on assessment of macroeconomic conditions: Malhotra
Malhotra said the big rate cut was based on a thorough assessment of current macroeconomic conditions.
The repo rate is the key rate at which the central bank lends to commercial banks.
Since February 2025, the RBI has cut this policy repo rate by a total of 50 bps, prompting most banks to lower their lending rates.
This indicates a shift toward a pro-growth policy amid easing inflationary pressures.
Economic outlook
Rate cut amid GDP numbers, investment opportunities
According to government data, retail inflation fell to 3.16% in April from 3.34% in March, well below RBI's comfort level of 4%.
Governor Malhotra has said that the Indian economy presents huge opportunities for investors due to factors like demography, digitalization, and domestic demand.
The move also comes after the government released GDP numbers for Q4 and full year FY25, with Q4 growth beating estimates at 7.4%.