The Reserve Bank of India Monetary Policy Committee, led by Governor Sanjay Malhotra, reduced the key lending rate by 50 basis points to 5.5%. Moreover, the cash reserve ration or CRR was slashed by 100 bps. The inflation projection for financial year 2026 has also been lowered.
Here are five key highlights from the monetary policy:
Highlight 1: Repo Rate Cut 50 Bps
The MPC decided to cut the repo rate by 50 basis points, bringing it down to 5.5%. This reduction aims to stimulate economic activity by making borrowing cheaper for businesses and consumers.
In its previous meeting in April 2025, the MPC, led by RBI Governor Sanjay Malhotra, unanimously decided to reduce the repo rate by 25 basis points, reducing it from 6.25% to 6%.
Highlight 2: CRR Cut Sharply
The Reserve Bank of India also announced a reduction in the Cash Reserve Ratio by 100 basis points, lowering it from 4% to 3%.
This cut will be implemented in four staggered stages and is expected to release primary liquidity of Rs 2.5 lakh crore into the banking system.
The reduction in CRR aims to enhance liquidity and reduce the cost of funding for banks.
Highlight 3: Stance Changed To 'Neutral'
The RBI has shifted its policy stance from 'accommodative' to 'neutral'. This change indicates a more balanced approach, suggesting that future rate cuts or hikes will be data-driven and dependent on evolving economic conditions.
In April, the MPC had decided to change the stance from 'neutral' to 'accommodative'.
Highlight 4: Inflation Outlook Lowered
The inflation outlook has been revised downwards, with the Consumer Price Index inflation for FY26 now projected at 3.7%, compared to the previous estimate of 4% in April 2025.
This adjustment reflects expectations of lower price pressures in the coming year.
Highlight 5: Growth Projection MaintainedÂ
The GDP growth projection for fiscal 2026 remains unchanged at 6.5%. The quarterly growth rates are forecasted at 6.5% for Q1, 6.7% for Q2, 6.6% for Q3, and 6.3% for Q4.
Governor Malhotra acknowledged that growth is "lower than aspirations," but maintained the overall projection.
RBI Policy: Other Key AnnouncementsÂ
RBI Governor Malhotra also highlighted the challenges faced by emerging market central banks in managing spillovers from global economic developments.
In the previous MPC meeting in April 2025, the committee had reduced the repo rate by 25 basis points from 6.25% to 6% and changed the stance from 'neutral' to 'accommodative'.
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