RBI Slashes Repo Rate by 50bps—Traditional Finance Plays Catch-Up Again
India's central bank just made a bold move—chopping the repo rate by half a percentage point. The Monetary Policy Committee's decision signals urgency, but crypto natives saw this coming miles away.
While traditional markets scramble to adjust, decentralized finance keeps humming along at its own rhythm. Another reminder: legacy systems react, while blockchain protocols pre-code their monetary policies.
Funny how 50bps moves still make headlines in 2025—meanwhile, algorithmic stablecoins rebalance by the millisecond without committee meetings or press releases.
Malhotra claims price stability preserves purchasing power
#RBIMPC | 🚨 "There is stability on all three fronts – price, financial and political," says RBI Governor Sanjay Malhotra #RBI #RBIPolicy #SanjayMalhotra #RepoRate pic.twitter.com/dkKEvlk0GP
— Moneycontrol (@moneycontrolcom) June 6, 2025
Malhotra claimed that price stability preserved purchasing power, adding that there was stability on all three fronts – price, financial, and political. According to the RBI governor, the stability of prices imparted certainty to households and businesses in their savings and investment decisions. It also ensured congenial interest rates and financial conditions, all encouraging consumption, investment, and overall growth.
The Ministry of Statistics and Program Implementation reported that the RBI rate cut came amid a steady decline in inflation at a time when India’s GDP grew at 7.4% in the fourth quarter of FY 2024-25. The Ministry also disclosed that retail inflation eased to 3.16% in April, down from 3.34% in March and well below the RBI’s comfort level of 4%. India’s government estimated the full fiscal year FY 2024-25 GDP growth at 6.5%.
“This decision is in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 percent, while supporting growth.”
-Sanjay Malhotra, Governor of the Reserve Bank of India
The RBI cut the repo rate by 25 basis points in the previous MPC meeting held on April 7–9, from 6.25% to 6%. That followed a similar cut in February, from 6.5% to 6.25%, signaling the central bank’s pivot toward a pro-growth policy amid easing inflationary pressures.
RBI policy lifts market mood as Indian stock market saw a sharp turnaround
The Indian stock market saw a sharp turnaround after a flat start in the morning, with both benchmark indices gaining strength after the RBI policy announcement. The Sensex jumped 488 points or 0.60% to 81,930.37, while the Nifty climbed 168 points or 0.68% to 24,919.30, as investors cheered the central bank’s stance.
The Nifty Bank index also surged nearly 500 points or 0.90% within minutes of the announcement, trading around 56,260.75. Sectors like banking, auto, and realty led the rally with gains of nearly 1%, lifting overall sentiment.
The RBI Governor said the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25%, and the marginal standing facility (MSF) rate and the Bank Rate to 5.75%. He pointed out that in the future, economic activity will continue to maintain momentum in 2025-26, supported by private consumption and traction in fixed capital formation. Atul Monga, the CEO and Co-founder of BASIC Home Loan, said the upcoming MPC meeting could be a key indicator of India’s broader economic recovery.
The RBI governor also said that in order to provide durable liquidity, the central bank had decided to reduce the cash reserve ratio (CRR) by 100 basis points to 3% from 4% earlier. He added that this will be done during the course of the year in four equal tranches of 25 basis points, each coming into effect from the fortnights beginning September 6, October 4, November 1, and November 29 of this year. The cut in CRR WOULD release primary liquidity of about Rs 2.5 lakh crore to the banking system by the end of November 2025.
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