The Reserve Bank of India (RBI) on Friday, June 20, released the minutes of the Monetary Policy Committee (MPC) meeting held between June 4-6, 2025, shedding light on the rationale behind the 50 basis points repo rate cut to 5.5% and a 100 basis points reduction in the cash reserve ratio (CRR).While the decision marked the third straight policy rate cut in 2025, the minutes reveal that several MPC members acknowledged diminishing monetary space, even as they advocated timely easing to support growth.
Growth support key, but policy space narrowing
RBI Governor Sanjay Malhotra described the global economy as “fragile and fluid,” noting that growth remains subdued even as inflation recedes. He warned that while support for growth is crucial, “monetary policy is left with very limited space to support growth.”“Global uncertainty underscores the need for growth-supportive policies,” he said, adding that the Indian economy’s trajectory remains contingent on the south-west monsoon, which will have implications for inflation and consumption.Also Read: RBI reduces provisioning requirement for project finance, effective Oct 1He stressed that the June measures — including the CRR cut — would “provide some certainty in times of uncertainty and support growth.”Scope for regulatory push and infra-led growthDeputy Governor Poonam Gupta observed that inflation expectations are showing a “moderating trend” and highlighted a conducive backdrop for growth.
“Growth can accelerate based on significant infrastructure investment and a shift in regulatory policies,” she said, while also making the case for continued monetary support. “There is a need as well as the room for monetary policy to provide support,” she added, calling for a data-dependent approach, going forward.Strong case for rate cut, but room limitedExecutive Director Rajiv Ranjan offered one of the strongest endorsements of the 50-basis-point cut, noting: “There is a strong case to support aggregate demand through a front-loaded rate cut.”However, he flagged that the policy path ahead is constrained: “We are left with less room for further downward adjustments in policy rates.”Ranjan also cautioned against pairing a 50 bps cut with an “accommodative” stance, saying it may signal a policy posture that goes beyond what is appropriate under prevailing conditions. “Our policy setting under uncertainties is not cast in stone,” he said.Also Read: India’s forex reserves rise by $2.29 billion to $698.95 billionSituation warrants frontloaded easingExternal MPC member Ram Singh echoed the urgency to act, stating, “The current situation warrants a front-loaded rate cut.”Singh added that a 50-basis-point cut in this cycle “seems very reasonable and highly desirable,” especially to offer a “helping hand to growth” amid external headwinds and soft inflation.On June 6, the RBI slashed the repo rate by 50 basis points to 5.5%, alongside a CRR cut of 100 basis points, which is expected to inject up to ₹2.5 lakh crore of liquidity into the banking system.This marks a cumulative 100 bps reduction in policy rates since February, 2025. The central bank also revised its policy stance back to ‘neutral,’ after an ‘accommodative’ position in the April meeting.
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