Mumbai, June 11, 2025 — The Reserve Bank of India’s recent decision to slash the policy repo rate by 50 basis points is expected to accelerate growth, improve credit flow, and ease liquidity conditions, according to a new report by the Bank of Baroda.
The RBI’s unexpected rate cut, announced on June 6, brings the repo rate down to 5.5%, while also initiating a phased 100 basis-point reduction in the Cash Reserve Ratio (CRR). This move reflects what the report describes as a strong pro-growth stance by the central bank amidst easing inflationary pressures.
“These measures are expected to boost growth amidst easing price pressures and infuse liquidity along with supporting credit flow,” the Bank of Baroda said in its assessment, noting that the market has responded positively to the announcement and that a pickup in economic activity is anticipated in the coming quarters.
As a result of the policy action, the Standing Deposit Facility (SDF) rate has been revised to 5.25%, and the Marginal Standing Facility (MSF) and Bank Rate to 5.75%.
The RBI’s Monetary Policy Committee (MPC) has maintained its GDP growth projection for FY26 at 6.5%, indicating sustained optimism about domestic economic momentum. Simultaneously, the central bank revised its inflation forecast downward to 3.7%, reflecting growing confidence in the macroeconomic outlook.
The BoB report also pointed out that the RBI’s policy move aligns with improving global economic sentiments, as the United States and China begin working on new trade agreements.
“India’s monetary move comes against a backdrop of renewed optimism in the global economy,” the report said, adding that global central banks remain cautious, watching the delicate balance between inflation control and growth support.
The report further highlighted the European Central Bank’s recent 25 basis-point rate cut, suggesting a global tilt toward supportive monetary policies.
Looking ahead, the report noted that market attention will now shift to the US Federal Reserve, which is widely expected to maintain current interest rates. “Focus would shift towards the US Fed, wherein a pause is expected, especially since the labour market has been signalling some strength,” it added.
With easing domestic inflation, stable growth expectations, and cautious global cues, the BoB report underlines that the RBI’s latest monetary measures position the Indian economy on a firmer recovery path.
