RBI says jumbo rate cut a signal to bolster growth

Governor admits limited space after 100 bps cut since Feb, show MPC minutes

- Shayan Ghosh

Members of the Reserve Bank of India's Monetary Policy Committee decided in favour of an unexpected 50-basis point (bps) rate cut at their meeting earlier in June to prop up economic growth, especially with inflation appearing to be under control, minutes of the discussions released by the central bank showed on Friday.

Five of the six-member rate-setting committee—external members Nagesh Kumar, Ram Singh, executive director Rajiv Ranjan, deputy governor Poonam Gupta and RBI Governor Sanjay Malhotra—voted in favour of the 50 bps cut. External member Saugata Bhattacharya voted for a 25 bps cut.

So far this year, the monetary policy committee has reduced the repo rate by 100 bps.

The economy expanded 6.5% in FY25, at the slowest pace in four years, data released at the end of May showed. Meanwhile, retail inflation has been benign, easing to 2.8% in May from 3.16% in April.

While announcing the monetary policy decision on 6 June, Malhotra acknowledged that gross domestic product growth remains lower than aspirations, but the central bank retained its forecast at 6.5% for FY26.

The RBI also lowered its inflation forecast by 30 bps, with retail inflation for FY26 now pegged at 3.7%.