Background: Competency-based medical education (CBME) offers avenues for effective psychiatry teaching to medical students. However, data concerning the feasibility, effectiveness, and students’ perspectives on CBME-based clinical rotation, including psychiatry, needs to be explored in India. Therefore, this research aims to evaluate the student’s learning effectiveness and feedback on the CBME-informed psychiatry posting. Methods: This cross-sectional retrospective research evaluated the 7th-semester MBBS students (n = 101, 39 [38.6%] females and 62 [71.4%] males), from a tertiary-care teaching hospital in central India, perceived change in Knowledge, Attitude, and Skill and feedback on the CBME-based clinical rotation (July-December 2023) using a mixed-method approach through an online feedback form. Results: A “considerable or marked perceived change,” ranging from 70% to 97%, in the knowledge, attitude, ethical aspects, psychomotor skills, and soft skills were noted. 84%–91% of students were “satisfied/quite satisfied (or rated it good to very good)” with the pattern and content of the program, including the assessment. 37% expressed their desire to take psychiatry as an elective. Descriptive responses showed that participants felt improvement in their communication skills, knowledge about non-pharmacological interventions, opportunity to observe and present cases in the Outpatient Department, and satisfaction with the teaching and assessment methods. The need for minor changes regarding case-based formative assessment and the opportunity for more case workups were also cited. Conclusion: The CBME-informed psychiatry clinical rotation can be instrumental in improving psychiatry training and promoting mental health among students. Research involving a comparison arm, longitudinal design, and validated assessment tools can bring greater insights into the subject.