In a move that surprised markets and signaled a decisive shift in monetary strategy, the Reserve Bank of India (RBI) today cut the repo rate by 50 basis points, bringing it down to 5.5% from 6%. It also announced a staggered 100 basis point reduction in the Cash Reserve Ratio (CRR), to 3%, while shifting its policy stance from ‘accommodative‘ to ‘neutral‘. This signals a pause in the easing cycle after frontloading stimulus to support economic momentum.
RBI Repo Rate Cut & Policy Details
This marks the third rate cut in 2025, amounting to a cumulative reduction of 100 basis points since February. Alongside the repo rate cut, the RBI’s decision to reduce the CRR by 100 bps—from 4% to 3%—will be rolled out in tranches from September through December.
The neutral policy stance indicates that while the central bank has acted decisively to boost growth, it is now likely to wait and assess the impact before considering further easing.
Macroeconomic Context
The policy action comes amid increasing global uncertainty, with renewed U.S. tariff actions and rising geopolitical tensions in Asia impacting trade flows and investor confidence. Domestically, although Q1FY25 GDP growth came in strong at 7.4%, it was partly supported by one-off fiscal adjustments. Underlying indicators—such as consumer spending and private investment—have shown signs of softening, prompting the RBI to act preemptively.
Governor’s Commentary
Governor Sanjay Malhotra emphasized that policy transmission is progressing faster this cycle, aided by the frontloading of rate cuts and liquidity support measures.
“We have frontloaded cuts to support faster transmission,” he stated during the post-policy press conference.
He also highlighted that the RBI has revised its FY26 inflation forecast downward to 3.7%, from the earlier 4%, placing it well below the central bank’s 4% target. With real policy rates now above the RBI’s preferred 100–150 basis point corridor, the RBI retains flexibility to pause or act again depending on evolving growth conditions.
Expert Reactions & Market Responses
“The MPC has delivered an unexpected outsized cut. Combined with CRR easing, this decision sends a strong signal to stimulate demand before deeper deceleration takes hold.”
— Ranen Banerjee, Partner and Leader, PwC India
“It’s a decisive step toward easing systemic liquidity. With INR 2.5 lakh crore expected from CRR reduction, NBFCs and banks will see a meaningful cost advantage.”
— Amit Bansal, Founder, BharatLoan
“This is a policy bonanza aimed at hastening monetary transmission and propelling growth. The neutral stance, however, may temper future rate cut expectations.”
— Shriram Ramanathan, CIO – Fixed Income, HSBC MF
Financial markets responded positively. Yields on shorter-tenor bonds fell, and rate-sensitive equities saw gains. However, longer-dated bonds were mixed, reflecting a more cautious outlook and limited expectations for further open market operations (OMOs).
“RBI Repo Rate cut surprised the bond market with frontloading of both the rate cut and liquidity support. This is aimed at nudging the economy to its next gear.”
— Dhawal Dalal, CIO – Fixed Income, Edelweiss MF
“A well-timed and strategic move. It reinforces RBI’s confidence in India’s macro stability, while addressing growing uncertainty globally.”
— Dhruv Agarwala, Group CEO, Housing.com & Proptiger.com
“We view this as a bold, growth-first approach by the RBI. It addresses near-term concerns while preparing the economy to absorb future shocks.”
— Shekhar Patel, President, CREDAI
“The RBI Repo rate cut is substantial, but the neutral stance is a reminder that policy easing will now be more data-driven.”
— Sujan Hajra, Chief Economist, Anand Rathi Group
“This will improve borrower sentiment, particularly for first-time buyers. It’s a clear signal of confidence in India’s underlying growth story.”
— Manju Yagnik, Vice Chairperson, Nahar Group
“The RBI has done its part. The ball is now in the banks’ court to ensure swift and full transmission to the end users.”
— Madhavi Arora, Chief Economist, Emkay Global
“Thе ratе cut is a significant stеp at a timе whеn rising propеrty pricеs havе impactеd affordability. Thе affordablе sеgmеnt, in particular, will bеnеfit thе most.”
— Amit Bhagat, Co-Foundеr and CEO, ASK Propеrty Fund
“With thе rеpo ratе now at 5.50%, wе forеsее an uptick in homе buying activity drivеn by improvеd affordability. Thе rеvisеd inflation forеcast is еncouraging and givеs confidеncе in thе RBI’s forward-looking policy framеwork.”
— Shraddha Kеdia-Agarwal, Transcon Dеvеlopеrs
“This is a wеll-calibratеd movе, еspеcially in light of global hеadwinds. In citiеs likе Mumbai, financial accеssibility grеatly influеncеs dеcision-making, and this dеcision is timеly.”
— Nishant Dеshmukh, Sugее Group
“The RBI repo rate cut and CRR easing will boost affordability and liquidity, aiding affordable housing recovery, though global uncertainties and rising costs remain key challenges.”
— Anuj Puri, Chairman, ANAROCK Group
“The RBI repo rate cut reflects confidence in India’s macroeconomy and will boost rural demand by improving credit affordability and lowering borrowing costs for rural consumers.”
— HP Singh, CMD, Satin Creditcare Network
“The RBI repo rate and CRR cuts will enhance liquidity, lower borrowing costs, and support broad credit revival. We expect banks to follow with reduced lending rates soon.”
— Kishore Lodha, CFO, UGRO Capital
🔍 Looking Ahead
While this move marks a significant step in monetary easing, the RBI’s neutral stance underlines a data-driven approach going forward. Key variables that will guide future policy include:
- Inflation trajectory, particularly in light of the downward revision
- Transmission efficiency of rate and liquidity measures
- Global macro conditions, including trade policy and oil prices
- Domestic revival in consumption and private capex
The RBI appears to have used its current policy toolkit in a targeted manner—balancing the need for stimulus with prudence in a volatile external environment.
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