Everything you should know in the world of Finance

In India, the Reserve Bank of India (RBI) governs the monetary policy and uses a bouquet of rates to maintain economic stability, control inflation, and influence liquidity in the financial system. And the three most critical interest rates that are pivotal to this monetary policy are the repo rate, bank rate and Marginal Standing Facility (MSF) rate.

Understanding their distinct roles and the nuances that set them apart from each other is necessary in making informed financial decisions.

The Reserve Bank of India (RBI) has already cut the repo rate twice this year—by 25 basis points each in February and April, bringing the key policy rate down from 6.50% to 6.00%. With the Monetary Policy Committee (MPC) scheduled to meet between June 4 and 6, market consensus strongly anticipates a similar cut, in order to rein in inflation and support the country’s economic growth. 

When economic turbulence strikes, the RBI steps in with tools like the repo rate. While banks feel the impact first, NBFCs are indirectly influenced as changes in market funding costs gradually shape their lending environment.

The Reserve Bank of India's (RBI) Monetary Policy Committee (MPC) is crucial in guiding India's monetary policy. Established to improve transparency and accountability, the MPC sets key policy rates, like the repo rate.

The RBI repo rate is one of the most influential tools in India's economic toolkit, shaping everything from inflation rates to borrowing costs and consumer behaviour. Announced by the Reserve Bank of India (RBI) on a regular basis, the repo rate acts as a critical lever for managing liquidity and steering the country’s economic growth. But how often does the RBI make these announcements? What factors drive their decisions, and how do they impact markets, businesses, and individual consumers?

As the RBI’s Monetary Policy Committee (MPC) convenes this week, industry insiders are expecting a third consecutive repo rate cut of this year—most likely by 25 basis points, potentially lowering the rate to 5.75%. This follows two prior cuts earlier this year, in February and April, which brought the repo rate down from 6.50% to 6.00%. This sustained easing cycle is likely supported by a benign inflation outlook, with CPI inflation moderating to 3.2% in April, well within the RBI’s 4% target band.

In a move that has set the financial markets abuzz, the Reserve Bank of India's Monetary Policy Committee has delivered what many would call a “jumbo” rate cut—slashing the repo rate by 50 basis points in its June 2025 meeting. This bold step that is coming on the heels of two earlier 25 bps reductions this year signals a decisive pivot towards supporting growth as inflation remains subdued and global uncertainties persist. For seasoned investors, especially those with a penchant for fixed income, this is a moment that demands both reflection and action.