With the Reserve Bank of India's Monetary Policy Committee (MPC) meeting set to begin tomorrow (June 4), market watchers are once again back to decoding cues: will the central bank cut the repo rate for the third time in a row?
The answer may lie in the numbers that have quietly aligned in the RBI's favour over the past few months. Headline inflation is under control, April's Consumer Price Index (CPI) stood at 3.16 per cent, the lowest in nearly six years. Growth is holding up as well, India's gross domestic product (GDP) rose by 7.4 per cent in Q4 FY25, pushing full-year growth to 6.5 per cent, in line with expectations. Add to this a liquidity surplus in the banking system of over Rs 2.3 lakh crore, and the setting - for many experts - seems just right for a policy nudge.
However, the big question now is whether there will be a 25 basis points (bps) cut or more.
All Eyes on June 6: RBI Policy Date June 2025
The June 2025 RBI policy meeting is the second one for the financial year (FY) 2026. It will start on Tuesday, June 4, and will wrap up with Governor Sanjay Malhotra's statement on Friday, June 6.
At present, the repo rate stands at 6 per cent, following cuts of 25 bps each in April and February. Another cut on Friday would bring the rate down to 5.75 per cent, a cumulative 75 bps drop in just four months.
Economists tracking the RBI policy next date and direction mostly agree on what's coming.
“The system liquidity is expected to remain ample in Q1 and Q2 FY26, driven by the significant RBI dividend and a seasonal drop in currency in circulation. The RBI’s accommodative stance is likely to continue, with a 25 basis point repo rate cut anticipated at the June policy meeting and expectations for the repo rate to settle at 5.50 per cent for the remainder of the financial year, further supporting growth and investment. With CPI inflation moderating to 3.16 per cent in April and projected to stay below 4 per cent for most of 2025, the RBI is expected to revise its FY26 CPI target down to 3.80 per cent from 4.00 per cent," says Laukik Bagwe, Head, Fixed Income at ITI Mutual Fund.
"Strong policy coordination between fiscal and monetary authorities, robust fiscal buffers, and proactive adjustments collectively reinforce India’s outlook for sustained macroeconomic stability and robust growth in FY26," he further adds.
That said, a few market participants are also factoring in the possibility of the MPC tweaking the repo–SDF (Standing Deposit Facility) spread, which would allow a broader transmission of lower rates even with a limited headline cut.
What is SDF? Introduced by the central bank, the SDF is a tool that absorbs liquidity from commercial banks without collateral. Its main purpose is to absorb excess liquidity from the banking system.
Says Deepak Agrawal, CIO-Debt, Kotak Mahindra AMC, "There is an outside chance for MPC to widen the Repo- SDF spread from 25 bps to 50 bps, resulting in a 50 bps transmission with 25 bp rate cut. However, going ahead we expect additional 25 bps rate cut by October 2025."
Real Estate, Healthcare Sectors Hopeful
Beyond just macroeconomic fine-tuning, the expected policy move has clear sectoral implications as well. Ramani Sastri, Chairman and MD of Sterling Developers, for instance says that a further rate cut would be "highly encouraging for homebuyers and developers alike," especially as construction costs rise and developers face capital constraints.
"A supportive policy with lower rates would strengthen confidence, infuse liquidity, and firmly establish the real estate sector as a driver of economic growth," he says.
In the healthcare space, Sahil Lakshmanan, Chief Business Officer at CarePal Money, says a sustained low-rate environment would ease borrowing costs for individuals and small businesses seeking medical financing. "This could significantly increase demand for healthcare credit and expand access to essential services."
Both real estate and healthcare players are hoping the RBI policy next date will not just bring a rate cut, but also a strong message of continued support.
How a rate cut would help borrowers?
Since most home, auto and personal loans are linked to external benchmark lending rates (EBLR), any cut in the repo rate would typically lead to an equivalent reduction in EMIs for the borrowers.
Because of previous cuts, banks have already dropped their lending rates by 50 bps since February. A further cut would reduce monthly outgo for millions of borrowers across income groups.
The RBI MPC meeting in June 2025 is taking place at an optimistic time for the economy. With inflation subdued, growth robust, and global uncertainties relatively tamed for now, the central bank has some room to give a push to the economy without overheating it.
