Archive · 9 Jun 2025
RBI's Monetary Policy Loosening Raises Inflation Concerns
India's central bank, the RBI, has lowered interest rates and reduced the amount of money banks must keep in reserve.
This is meant to encourage spending and boost the economy.
However, this could lead to higher inflation if the economy doesn't grow quickly enough.
Critics argue that the policy is too aggressive, especially as inflation had already dropped to a low level.
They suggest the policy might be ineffective and cause more harm than good, potentially affecting people with less financial stability.
RBI cut the repo rate from 6% to 5.5% in June 2025.
The RBI has reduced the cash reserve ratio (CRR) from 4% to 3%.
The CRR cut will release about ₹2 lakh crore.
Inflation rate touched a six-year low of 3.2% in April 2025.
An aggressive loosening of monetary policy may not be warranted.
- Who
- RBI
- What
- RBI cut repo rate and CRR.
- When
- June 2025
- Where
- India
- Why
- To stimulate the economy.
Critics' View
RBI View
Impact of Policy
Critics' View
May cause higher inflation.
RBI View
Stimulate economic growth.
Credit-deposit growth
Critics' View
Credit growth is not high and an expansionary monetary policy helps improve credit growth.
RBI View
Bank credit is one form of funding but there are other kinds of funding.
- Repo Rate (June 6, 2025)
- 5.5%
- CRR
- 3%
- Additional Funds Released
- ₹2 lakh crore
Sources
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