RBI Bulletin: RBI Urges Swift Transmission of Rate Cuts by Banks

The Reserve Bank of India (RBI), in its June 2025 Bulletin, has emphasised the urgent need for banks to pass on the recent 50-basis point policy rate cut to borrowers, reinforcing its focus on accelerating credit transmission across the economy.

RBI Emphasises Timely Pass-Through of Repo Rate Cuts

In the RBI Bulletin, the central bank called on all commercial banks to swiftly align their lending rates with the recent reduction in the policy repo rate. The move is aimed at improving the speed and efficiency of monetary policy transmission and spurring lending activity amid supportive financial conditions.

The RBI had announced a 50-basis point cut in the repo rate on June 6, following two earlier reductions in February and April.

Banks Begin Implementing Rate Cuts; CRR Eased to Support Credit Flow

Major banks, including State Bank of India, Bank of Baroda, and HDFC Bank, have already acted on the June cut, adjusting their lending rates within days of the announcement, according to a PTI report.

In addition to the repo rate adjustments, the central bank also lowered the cash reserve ratio by 100 basis points bringing it down to 3% of net demand and time liabilities (NDTL). This CRR cut is scheduled to be implemented gradually over the second half of the year to ensure liquidity flows smoothly into the banking system.

The Bulletin highlighted that financial conditions remain conducive for effective rate transmission. This has already been observed in banks’ benchmark lending rates, including the external benchmark-based lending rates (EBLRs) and the marginal cost of funds-based lending rates (MCLR).

Between February and April, this accommodative stance began to bear fruit. The weighted average lending rate (WALR) on fresh rupee loans declined by 6 basis points, while the WALR on outstanding rupee loans dropped by 17 basis points during the same period.

Read More: Equitas, Ujjivan, AU Small Finance Bank Rally as RBI Cuts Priority Sector Lending Norms to 60%.

Conclusion

With monetary policy transmission gaining momentum, the RBI is keen to ensure that the benefits of rate cuts are fully passed on to end-consumers and businesses. As large lenders lead the way, smaller banks are expected to follow suit, helping reinforce credit demand and sustain economic recovery.

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