Is India Gearing Up for a Startup Surge? RBI’s June Rate Cut May Spark a Funding Revival

Imagine a domino effect—where a single policy decision from India’s central bank triggers a series of events that could unlock cheaper capital, higher consumer demand, and a fresh wave of confidence across the country’s startup ecosystem. That moment may be just around the corner.

As anticipation builds ahead of the Reserve Bank of India’s (RBI) monetary policy announcement on June 6, all eyes are on what could be a game-changing move. A recent report from the State Bank of India (SBI) has sparked excitement by predicting a “jumbo” rate cut of 50 basis points (bps). For India’s entrepreneurs and startup founders, this isn’t just monetary policy—it’s a potential turning point.

Let’s unpack what this could mean, why it matters, and how the startup ecosystem might be in for a significant boost.

The Big Prediction: 50 bps Rate Cut on the Cards

According to SBI’s latest economic report, the central bank is likely to cut the repo rate by 50 bps in its June 2025 meeting. If this materializes, it would be the most aggressive rate cut India has seen in recent years.

“We expect a 50-basis point rate cut in the June 2025 policy as a large rate cut could reinvigorate a credit cycle,” the report says.

SBI further projects that the current easing cycle could eventually lead to a total rate reduction of up to 100 bps.

Why now? The signs are aligning—cooling inflation, surplus liquidity, and a supportive macroeconomic environment have all created room for RBI to shift gears and focus on stimulating growth.

What’s Happening in the Banking World?

India’s financial system is currently swimming in liquidity. Banks have been steadily lowering interest rates since early 2025—some savings accounts now offer rates as low as 2.70%. Fixed Deposit (FD) rates have also been cut by 30 to 70 bps since February.

This trend suggests a strong and rapid transmission of RBI’s earlier policy decisions, and it’s likely to continue. For borrowers, this means more room to breathe. For startups, it could unlock new avenues to scale.

A Green Light from the Economy

Despite global economic uncertainties, India’s growth story remains intact. The country's GDP grew by 7.4% in Q4 of FY25, slightly lower than the previous year’s 8.4% but still robust—especially when supported by a healthy 9.4% rise in capital formation. This signals that businesses are still investing, building, and expanding.

Other macroeconomic indicators are also encouraging:

• Inflation is expected to stay within RBI’s comfort zone.

• Crude oil prices are falling, easing import burdens.

• Above-normal monsoon predictions could boost agricultural output.

• Household savings are on the rise, according to RBI’s Annual Report—giving more room for domestic-driven growth.

All these factors create a perfect runway for the RBI to take bold steps without fear of destabilizing the economy.

Recent Policy Timeline: A Shift in Approach

RBI’s policy tone has been gradually shifting over the past few months:

• February 2025: First repo rate cut in five years, down 25 bps to 6.25%.

• December 2024: CRR (Cash Reserve Ratio) cut to 4%, injecting ₹1.16 lakh crore into the system.

• October 2024: Policy stance changed from “withdrawal of accommodation” to “neutral.”

• August 2024: Repo rate held at 6.50%, caution prevailed amid global headwinds.

Clearly, the central bank has been prepping the ground for a more growth-oriented approach. And now, with global uncertainties slightly easing and inflation under control, a big repo rate cut seems more likely than ever.

What Does This Mean for Indian Startups?

Here’s where things get exciting. A 50 bps rate cut isn’t just good news for banks and businesses—it could light a fire under the startup ecosystem. Here's how:

1. Lower Cost of Borrowing

Startups that rely on term loans or working capital can benefit directly from reduced interest rates. Cheaper loans mean improved cash flow and less pressure to chase funding rounds prematurely.

Lower EMIs and better capital efficiency could give founders more room to breathe.

2. Better Access to Capital

An accommodative policy stance encourages banks to loosen their purse strings. This could mean improved credit terms and greater willingness to fund early-stage ventures that were previously considered too risky.

Fintechs, mobility players, and agri-tech startups could see a shift in lender behavior.

3. Increased Investor Interest in Equity

As returns from fixed-income instruments decline, venture capitalists and private equity players often turn to equity for better yields. Startups, especially in their growth phase, might become attractive destinations for capital.

This could revive funding rounds that had been on pause during the high-rate environment.

4. Boost in Consumer Spending

Lower interest rates also trickle down to consumers. From home loans to personal finance, borrowing becomes cheaper—driving up consumption. Startups in e-commerce, edtech, food delivery, and healthtech could ride this wave of renewed demand.

A consumption-driven growth spurt can work wonders for B2C startups.

5. Improved Operational Runway

Startups can extend their burn runway by accessing cheaper credit and optimizing operations. With reduced financial strain, founders can focus on scaling rather than just surviving.

This could delay the need for bridge rounds or emergency fundraising.

6. Confidence to Expand

Lower cost structures and improved liquidity create a confidence cushion. Startups may take bolder bets—launching new products, expanding to Tier 2 & 3 cities, or investing in R&D.

Especially relevant for SaaS, EV, and D2C brands eyeing pan-India reach.

But There’s a Catch…

Of course, the benefits of a rate cut depend on how much of it gets passed on by the banks. Startups without collateral or consistent cash flow may still struggle to secure loans. And while the macro environment is improving, external shocks—like global capital outflows or commodity spikes—could create turbulence.

Moreover, venture capital recovery tends to lag behind rate cuts. Confidence builds slowly, especially after a funding winter.

A Policy Signal Worth Watching

The June 6 policy announcement isn’t just another date on the calendar. It could signal a clear shift in India’s economic engine—from caution to acceleration. For startups navigating the post-pandemic world, struggling with funding delays and consumer sentiment, a 50 bps repo rate cut might be just the spark needed to revive growth.

If the RBI pulls the trigger, it may not only bolster India’s credit cycle but also re-energize its risk-taking, innovation-driven startup economy.

The message is clear: India's monetary policy may be finally aligning with its startup ambitions.

Over to You:
Will your startup benefit from a lower repo rate? Are you planning to raise funds or scale operations? Share your thoughts with us—and stay tuned for real-time updates from the June 6 policy meet.