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4w ago

RBI Cuts Repo Rate to 5.5%, Lowers CRR to 3% and Signals Pause in Easing Cycle

The central bank’s shift from an accommodative to a neutral stance signals limited room for further cuts, with banks gearing up to transmit cheaper borrowing costs to customers.

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FMCG

Overview

  • The Reserve Bank of India reduced its repo rate by 50 basis points to 5.5% on June 7, completing a cumulative 100-basis-point cut since February.
  • It announced a phased reduction in the cash reserve ratio by 100 basis points to 3% by end-November, which is expected to inject ₹2.5 lakh crore of liquidity into the banking system.
  • The central bank changed its monetary policy stance from “accommodative” to “neutral,” indicating it will wait before considering further rate adjustments.
  • Major lenders such as Bank of Baroda, Punjab National Bank, Bank of India, UCO Bank and HDFC Bank have cut external benchmark rates by up to 50 bps and trimmed MCLRs by up to 10 bps to pass on lower borrowing costs.
  • PNB CEO Ashok Chandra forecasts credit off­take growth of 1–2%, led by retail, agriculture and MSME segments benefiting from cheaper loans and improved liquidity.