Monetary Policy Committee of RBI Initiates Meeting, Anticipating Rate Reduction by 0.25% to 0.50% for Economic Expansion Boost.
Revamped Perspective:
Mumbai's Monetary Mayhem:
The RBI's policy-setting posse, the MPC, descended upon Mumbai for a three-day huddle, with high hopes swirling for a 25 bps or even a bold 50 bps rate slash to fire up economic growth, all while Trump's tariff raids cast clouds of uncertainty.
On Friday, the MPC, overseen by Reserve Bank Governor, Sanjay Malhotra, will drop their verdict.
Since February 2025, the RBI has shaved off 50 bps from the key interest rate (repo), setting it at 6%. This could mark the third consecutive reduction of the short-term benchmark lending rate.
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Following the cuts in the policy repo rate since February 2025, most banks have trimmed their repo-linked external benchmark-based lending rates (EBLRs) and marginal cost of funds-based lending rate (MCLR).
Experts speculate the RBI might reduce the repo rate by another 25 bps on Friday, with a possible similar trim in the next policy. However, SBI analysis envisions the central bank launching a "jumbo" rate cut of 50 bps in June itself.
CareEdge Ratings observed that diminishing inflation will grant the RBI the room to prioritize growth amid external hazards.
Although growth momentum has gained traction, challenges like uneven consumption recovery, subdued private capex growth, and damped manufacturing growth continue to persist. CPI inflation is anticipated to remain within comfortable limits in 2025-26, it said.
Catch the SBI Research's Prediction:"This paves the way for further monetary policy easing. We expect the RBI MPC to chop the policy rate by another 50 bps in FY26 (including 25 bps in June), with the potential for a deeper rate cut cycle should growth stumble," it said.
Deepak Aggarwal, Co-founder and Co-CEO of Moneyboxx Finance asserted that inflation is expected to remain below the RBI's 4% target, while growth remains steady, giving the upcoming MPC meeting a positive outlook for a measured rate cut.
"A more accommodating interest rate regime, bolstered by targeted liquidity measures, can significantly fortify credit flow to MSMEs and NBFCs, especially those catering to rural and semi-urban regions," Aggarwal added.
Raoul Kapoor, Co-CEO of Andromeda Sales and Distribution remarked that there are strong indications, along with widespread anticipation, that the RBI will enact a third round of rate trimming later this week.
Should another 25 bps rate cut happen, it would amount to a notable 75 basis points reduction in the calendar year 2025.
"The loosening of rates not only brings immediate financial relief but also stimulates consumer spending and investment, potentially increasing overall economic growth. As a result, both prospective and existing borrowers can look forward to a more favourable borrowing landscape in the coming months," Kapoor concludes.
Mandar Pitale, Head, Financial Markets, SBM Bank (India), expressed his expectation for a 25 bps cut in the policy rate at the June MPC meeting.
"This, combined with the ongoing accommodative stance, will position the MPC to respond to any data anomalies on either side," Pitale said, adding that another 25 bps reduction in August by the RBI is a possibility.
On his views regarding the 55th meeting of MPC, Rohit Arora, CEO and Co-Founder of Biz2X & Biz2Credit stated that a rate cut in the range of 25-50 basis points seems likely, supported by inflation staying beneath the 4% threshold and continued moderation in core inflation.
"This would deliver a timely boost to credit flow, particularly for MSMEs and housing, while reinforcing growth momentum. While the RBI remains attuned to domestic conditions, global cues like the US Fed's projection of two rate cuts in 2025 also provide comfort on the external front," Arora concluded.
The MPC counts three RBI members and three external members appointed by the government.
RBI members include: Governor Sanjay Malhotra, Deputy Governor M Rajeshwar Rao, and Executive Director Rajiv Ranjan.
External members are: Nagesh Kumar, Director and Chief Executive, Institute for Studies in Industrial Development, New Delhi; Shri Saugata Bhattacharya, Economist, Mumbai; and Professor Ram Singh, Director, Delhi School of Economics, Delhi.
Disclaimer: This is a syndicated feed. The article has been modified for length and clarity.
Business growth in India might significantly benefit from the anticipated rate cuts by the Reserve Bank of India (RBI), as more accommodating interest rates could fortify credit flow to small and medium enterprises (MSMEs) and non-banking financial companies (NBFCs). Finance experts, such as Deepak Aggarwal and Mandar Pitale, believe that a measured rate cut, potentially totaling 75 basis points in the calendar year 2025, would bring immediate financial relief, stimulate consumer spending and investment, and contribute to overall economic growth.
