RBI Monetary Policy Panel Begins Deliberations Ahead of June 6 Decision

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) has commenced its three-day meeting to determine the next steps in its monetary policy strategy. All eyes are now on the rate decision, set to be announced on Friday, June 6, 2025, as speculation rises over the possibility of a 25 basis points (bps) or even a surprise 50 bps rate cut.

The meeting comes at a critical juncture, as global economic uncertainty—especially following recent tariff measures by former U.S. President Donald Trump—has clouded growth prospects. The MPC, chaired by RBI Governor Sanjay Malhotra, is expected to continue its accommodative stance, with a focus on supporting domestic economic momentum.

Rate Cuts So Far and What's Expected

The central bank has already reduced the benchmark repo rate twice this year—by 25 bps each in February and April, bringing the rate down to 6%. If the June policy includes another cut, it would mark the third consecutive reduction in 2025.

In response to earlier rate cuts, most banks have adjusted their repo-linked External Benchmark-based Lending Rates (EBLRs) and Marginal Cost of Funds-based Lending Rates (MCLRs) downward.

Experts anticipate that a 25 bps cut is likely in the June policy, with the potential for an additional cut later in the year. However, some—such as analysts at SBI—are expecting a bold move with a 50 bps "jumbo" cut this month itself.

Inflation Provides Policy Space

According to CareEdge Ratings, moderating inflation gives the RBI leeway to prioritize growth. While indicators suggest an improving growth trend, persistent challenges include uneven consumption recovery, sluggish private investment, and subdued manufacturing performance.

Consumer Price Index (CPI) inflation is expected to remain within the RBI’s target range of 4%, creating further room for easing. CareEdge predicts a total of 50 bps in rate cuts for FY26, including a 25 bps cut this month.

Sector Voices: MSMEs, Housing, and Rural Lending

• Deepak Aggarwal, Co-founder & Co-CEO of Moneyboxx Finance, said the rate cut could boost lending to MSMEs and non-banking finance companies (NBFCs), especially those operating in rural and semi-urban regions.
• Raoul Kapoor, Co-CEO at Andromeda Sales and Distribution, emphasized that widespread market expectations are aligned with a third round of rate cuts this week. He added that reduced borrowing costs could encourage consumer spending and business investment, helping to strengthen the broader economy.
• Mandar Pitale, Head of Financial Markets at SBM Bank (India), cited India's recent GDP growth of 7.4%, which beat market estimates, as supportive of a 25 bps cut. He also expects another reduction in August, depending on economic data.
• Rohit Arora, CEO & Co-Founder of Biz2X & Biz2Credit, supports the view that a 25–50 bps cut is likely, supported by falling inflation and a stable global environment. He believes this would benefit credit flow to sectors like housing and MSMEs, and help sustain the current growth momentum.

Composition of the MPC

The six-member MPC comprises:

RBI Members:

• Sanjay Malhotra (Governor)
• M. Rajeshwar Rao (Deputy Governor)
• Rajiv Ranjan (Executive Director)

External Members:

• Nagesh Kumar (Institute for Studies in Industrial Development)
• Saugata Bhattacharya (Economist)
• Prof. Ram Singh (Delhi School of Economics)

As the June 6 policy announcement approaches, stakeholders across sectors are watching closely for signals on the RBI's evolving strategy in managing inflation, growth, and external headwinds.