June 2025 RBI MPC minutes hints at pause in rate cut cycle

23 Jun 2025 , 10:32 AM

WHAT AFTER THE BIG BANG RATE CUT IN JUNE 2025?

The RBI packed a lot of punch into the monetary policy statement on June 06, 2025. After cutting repo rates twice by 25 bps, the RBI MPC undertook a big-bang 50 bps rate cut. Since Feb-25, RBI has cut rates by 100 bps to 5.50%. However, RBI also announced a 100 bps cut in the CRR to 3.00% (albeit back-ended). RBI also reduced the inflation estimate for FY26 by 30 bps to 3.70%. As a cautionary note, the RBI also shifted the stance of the policy back from “Accommodative” to “Neutral” indicating that rate cut cycle may be done for now.

However, the sharpest messages are not found in the MPC statement, but in the MPC minutes, which was published on June 20, 2025. The minutes help us understand the logic behind each decision, and why some members disagreed. Remember, while all the 6 members of the MPC voted for a rate cut, only Saugata Bhattacharya was of the view that 25 bps rate cut would be adequate, instead of 50 bps. Here is the gist of the MPC minutes.

• NAGESH KUMAR WARNS OF THE UNCERTAINTY QUOTIENT

Nagesh Kumar has once again expressed concerns about global uncertainties, geopolitical risk, tariff questions, and rising trend of protectionism among nations. He underlined the need for low rates when the IMF had downgraded global GDP growth by 50 bps to 2.8% for 2025. While the Q4FY25 growth recovery was welcome, it was not broad-based, and too dependent on rural consumption and government sponsored capex. He noted; fiscal bit had come from the ₹2.69 Trillion RBI dividend, and monetary policy had to do its bit. Nagesh Kumar voted for 50 bps rate cut and a shift of stance from “Accommodative” to “Neutral.”

• SAUGATA BHATTACHARYA FEELS 25 BPS RATE CUT ENOUGH

Saugata Bhattacharya was the only MPC member who did not subscribe to the 50 bps rate cut narrative. He was of the view that in the current circumstances, a 25 bps cut would be enough. More so, because it comes in the backdrop of 50 bps rate cut already done, and also to keep some monetary legroom available. Bhattacharya was of the view that Indian economy was exhibiting a good deal of resilience, even without any stimulus. Hence, a 25 bps cut at this juncture would be sufficient and leave additional monetary room for the RBI.

• PROF RAM SINGH SAYS; PREPARE FOR FLUID MACROS

Ram Singh of the Delhi School of Economics underlined that, while inflation was meaningfully lower and growth was still robust, India and the world was entering a period of fluid macros. According to Ram Singh, the assumptions about global growth and inflation were literally changing on a daily basis. The combination of tariffs and geopolitical strife could have upside risks for inflation and downside risks for growth. Hence, while the 50 bps rate cut was justified, it was essential to pre-warn the markets that they should not expect much more from the RBI in terms of monetary policy stimulus. He also admitted that the rate cuts would put pressure on NIMs of banks, but that would be offset overall.

• RAJIV RANJAN FOCUSES ON SOFTER THAN EXPECTED INFLATION

According to Rajiv Ranjan, the inflation has been softer than expected on a persistent basis. With a strong Kharif and Rabi in 2024, there was a solid case for front-loading rate cuts, which is apparently done for now. He has rightly pointed out that the front-loading of rate cuts was justified on the grounds that monetary policy tends to impact with a lag. Hence, a 50 bps rate cut, instead of a 25 bps rate cut, makes the transmission quicker. Rajiv Ranjan cited the combination of domestic comfort and global uncertainty for combining a higher rate cut with a reversal of monetary stance.

• POONAM GUPTA FAVOURS FRONT-LOADING RATE CUTS

Dr Poonam Gupta underlined that the 6.5% GDP growth in a tough FY25, combined with lower than expected inflation gives the RBI more room to manoeuvre monetary policy. The question is of how much support and at what pace. According to Poonam Gupta, there is merit in front-loading the rate cuts as it fosters policy certainty and faster transmission compared to a staggered rate cut. She also supported the reversal of monetary stance, indicating that further action would be purely driven by incoming data.

• RBI GOVERNOR SAYS, TIME FOR PRIVATE SECTOR TO INVEST

The RBI governor believes that with public investments driving the post-COVID recovery; it was time for the private sector to chip in. Till recently, the rates were high and so cost of funds were high. However, now that has also been reversed with repo rates down by 100 bps. Private sector should now feel more confident to borrow and invest in capex. He also underlined that with rapidly falling inflation, the RBI had more room to be accommodative, but the change in stance was to give out the signal that the world lives in uncertain times. The stance shift must be viewed from that perspective.

WILL THERE RATE CUTS GOING AHEAD?

After 100 bps rate cut, the RBI has changed the stance back to Neutral. This indicates that further rate cuts would be data driven, but also suggests that in case of need, the RBI has the instruments at its disposal to boost growth. Now, the RBI needs to see more evidence of the rate cuts translating into lower cost of funds and greater inclination to invest by the private sector. The next few months of global tumult could hold the key to the future direction of RBI policy!