RBI Slashes CRR by 100 bps, Unlocks Rs 2.5 Lakh Crore for Banks

In a decisive move to boost liquidity and support economic expansion, the Reserve Bank of India (RBI) on June 6 announced a 100 basis point cut in the Cash Reserve Ratio (CRR) — the first such aggressive reduction in over a decade. The CRR has been lowered from 4 percent to 3 percent, to be implemented in four tranches of 25 basis points each. This significant cut is expected to infuse Rs 2.5 lakh crore into the banking system, offering ample liquidity for lending and investment activity.

Repo Rate Cut and Stance Revision
Alongside the CRR reduction, the Monetary Policy Committee (MPC) voted to reduce the policy repo rate by 50 basis points to 5.50 percent, marking the third straight rate cut this year. The committee also revised the policy stance from 'accommodative' to ‘neutral’, signalling a more balanced approach going forward.

Inflation Eases, Growth Outlook Steady
On the inflation front, the RBI revised its CPI inflation forecast for FY26 downward to 3.7% from the earlier 4%, citing easing price pressures, particularly in food and fuel segments. Despite the aggressive liquidity push, the RBI kept its GDP growth projections for FY26 unchanged, with forecasts at:
6.7% for Q2FY26
6.6% for Q3FY26
6.3% for Q4FY2

Read More - RBI's Hat-trick Rate Cut: Repo Down to 5.5% as Inflation Falls to 3.7%,

Economists Read Between the Lines
Commenting on the policy move, Garima Kapoor, Chief Economist at Elara Capital, said:
“An assessment of growth being lower than aspiration and inflation continuing to remain benign offered room for RBI’s MPC to cut the policy repo rate by 50 bps. However, a 100 bps CRR cut along with a policy repo rate cut of 25 bps suggests an assertive growth bias of the policy, especially in an uncertain global environment.”

Kapoor added that the 100 bps cut in CRR will ensure quick transmission of rates, support banks’ net interest margins (NIMs), and ensure ample liquidity to aid credit demand as it revives.
 

“Hereon, the rate trajectory will be data dependent. Should inflation come below 3.7% or risks to growth rise, another 25 bps cut cannot be ruled out,” she noted. However, she said the RBI is likely to wait for the monsoon season to conclude and assess global trade developments before taking further action.

With this calibrated yet bold policy mix, the RBI has made it clear that growth is a priority, but without losing sight of its inflation mandate.