The Monetary Policy Committee (MPC) under the chairmanship of Sanjay Malhotra, Governor, Reserve Bank of India on Friday (June 6, 2025) voted to reduce the policy repo rate by 50 basis points (bps) to 5.50% with immediate effect.
Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25% and the marginal standing facility (MSF) rate and the Bank Rate to 5.75%.
Here we give the reactions from industry circles
“The Reserve Bank of India’s decision to reduce the repo rate by 50 basis points to 5.5% underscores a clear commitment to supporting growth,” said Yashish Dahiya, Chairman & Group CEO of PB Fintech.
“Coupled with the shift to a neutral stance, it signals a more balanced and measured approach going forward. This move will ease borrowing costs and enhance liquidity, benefiting MSMEs and retail loan borrowers. Overall, we believe this step will positively influence India’s economic momentum amid global headwinds.”
50 bps rate cut to boost real estate, broader economy:
Shishir Baijal, Chairman and Managing Director, Knight Frank India, commenting on the announcement made by the RBI’s Monetary Policy Committee, said: The RBI’s 50 bps rate cut marks a strong and proactive stance aimed at lifting the low and mid value housing segments. Over the last few years, the strong housing market momentum was increasingly concentrating in the premium end even as there were signals of weakening the lower segments. With this cumulative 100 basis point cut in the policy interest rate we expect rekindling of the lower segments as affordability will witness a meaningful improvement for such homebuyers. We hope that the developer community too renews its focus in a big way to give longer legs to this housing market upcycle which is in its 5th year. Liquidity conditions remain balanced and conducive to supporting this monetary stance and we hope to see a greater transmission of this rate cycle.
Binod Kumar, MD and CEO of Indian Bank: The RBI’s decision to cut the repo rate by 50 basis points to 5.50% while changing its stance to neutral will boost credit demand in sectors like Retail, Agriculture and MSME. It will also encourage private capex. CRR cut will provide liquidity at the hands of banks. RBI is taking very proactive steps keeping in view looming headwinds on credit growth. Lower rates will spur the retail demand especially for affordable housing. Good monsoon coupled with lower rates augurs well for agriculture sector. It will drive consumption and will boost rural demand. MSMEs, which are vital to India’s economy, will see improved cash flow and more room to grow.
Ensure transmission
We will ensure to pass on rate transmission immediately to support entrepreneurs and keep the economy moving forward.
Anuj Puri, Chairman – ANAROCK Group
As widely anticipated, the RBI decided to reduce the repo rates by 50 bps (to 5.5%) to the backdrop of moderating inflation in the country. This is the third consecutive time this year that the apex bank has cut the repo rates. This effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers. This can potentially boost demand in the Indian real estate sector, especially in affordable and mid-income segments. Affordable housing faced the sharpest pandemic fallout, with sales and new launches shrinking in the top 7 cities.
ANAROCK data shows that affordable housing sales share plummeted from 38% in 2019 to 18% in 2024, while its supply share dropped from 40% to 16% in the same period. However, a 19% dip in unsold stock hints at sustained demand led by end-users. It will also lower developers’ borrowing costs. It is sincerely hoped that banks pass on the benefits of this move seamlessly to borrowers.
The reduction in the Cash Reserve Ratio (CRR) will help boost liquidity in the banking system, which means that banks have more funds to lend. Developers will be able to access more capital for their projects, and this can positively impact project completion timelines. It also gives banks the option to reduce home loan interest rates, which will have again positively impact sentiment in the affordable and mid-income segments.
Nevertheless, these positive impacts may be partially dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration, which have increased the cost of imported construction materials and created economic uncertainty. We may see some impact on the demand for luxury and commercial projects, and developer margins may be squeezed.
While the rate cut is a strong positive for real estate, especially for affordable housing, much now depends on how well it can adapt to higher input costs and ongoing global uncertainties. Continued policy support and a shift to domestic sourcing could be critical for sustained growth.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “The higher than expected repo rate cut comes along with a shift in the stance back to neutral. This clearly points towards future decisions being more data dependant given the significant global uncertainties. Furthermore, the sharp drop in CRR is likely to keep liquidity conditions suitably comfortable to ensure monetary transmission.”
Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India.
The MPC has delivered an unexpected outsized policy rate cut of 50bps against a consensus expectation of a 25bps cut. This is accompanied by a 100bps staggered cut in CRR and a change in policy stance to neutral. The decision is likely owing to the GDP prints for Q4 of FY25 reflecting weakness in manufacturing and consumption, as well as the adverse impacts of global trade and conflict headwinds. The policy rate easing, combined with the liquidity increase for banks when system liquidity is already comfortable, is likely to add a second engine to the consumption growth flight that is anticipated to be already in flight from the income tax cuts taking effect in FY26. This is significantly positive for urban consumption, which printed weak in past quarters, and will also likely add a fillip to real estate, discretionary purchases, and private capex.
Mr. Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE:
“RBI’s decision to cut the repo rate by 50 basis points is a significant move that will have a positive impact on the economy and various sectors, including real estate.
This reduction is expected to lead to lower borrowing costs, increased liquidity, and enhanced consumer spending power.
Home loans to become affordable
For the real estate sector, this move is particularly beneficial as it will make home loans more affordable, stimulating demand and driving growth. The reduced interest rates will also encourage developers to take on new projects, boosting construction activity and creating employment opportunities.”
Mr Pankaj Chadha, EEPC India, on Monetary Policy
With inflation well within its comfort zone, the RBI has, on expected lines, cut the benchmark repo rate by 50 basis points to 5.50% effective immediately. By lowering borrowing costs, the move is set to provide a big impetus to growth and lift investor sentiment.
Additionally, the central bank has decided to reduce the cash reserve ratio (CRR) by 100 basis points to 3% to enhance liquidity in the banking system. We welcome the RBI’s well-thought-out decisions.
As mentioned during the monetary policy statement, uncertainties persist on the global front, posing downside risks to merchandise exports. Several multilateral agencies have revised the global trade outlook downward for the current year.
Despite multiple challenges, engineering goods exports from India started on a positive note in FY26, clocking 11.28% year-on-year growth in April at $9.51 billion.
The protective measures in terms of 50% duties on iron and steel and their derivatives by the US threaten to impact engineering shipments to our biggest market.
The back-to-back interest rate cuts by the RBI is set to provide support to the industry and further push growth.
Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said: “The higher than expected repo rate cut comes along with a shift in the stance back to neutral.
Data to decide future move
This clearly points towards future decisions being more data dependant given the significant global uncertainties. Furthermore, the sharp drop in CRR is likely to keep liquidity conditions suitably comfortable to ensure monetary transmission.”
Ajay Kumar Srivastava, MD & CEO, Indian Overseas Bank
“The RBI’s decision to reduce repo rate by 50 basis points to 5.50% and CRR by 100 basis points in four tranches indicates a strong and timely policy shift that aligns with balancing growth with price stability. Besides this, the revision in CPI inflation to 3.7% for FY26 also shows RBI’s confidence in inflation being aligned with its 4% target. The decision in CRR cut which is expected to release INR 2.5 lakh crore in primary liquidity, will ease credit conditions in the banking system. This overall policy reflects a well calibrated and thoughtful approach with the GDP projected at 6.5% in FY26 and a steady quarterly trend. The pickup in non-gold imports and 14% increase in gross FDI also indicate robust domestic demand and global investor confidence in India’s structural strength. We believe this policy decision is expected to provide the necessary drive for credit expansion in priority sectors which will fasten the inclusion economic growth.”
Umeshkumar Mehta, CIO, SAMCO Mutual Fund said: A third straight cut in the repo rates this year with 50 bps cut instead of an estimate of 25 bps is a pleasant move. This demonstrates a pro-growth stance and a front-loading of rate cuts given our stable economic growth and declining inflation. A change in policy stance from accommodative to neutral is also justified as it can help to strike a right balance between growth and inflation, especially if geopolitical issues escalate further. Today’s policy levers are expected to boost consumption, stimulate domestic growth, and ensure liquidity amongst the varied global challenges.
Ms. Rajani Sinha, Chief Economist, CareEdge Ratings on RBI MPC .
“In its latest monetary policy meeting, the Monetary Policy Committee (MPC) announced a 50-bps cut in the policy rate – exceeding expectations and effectively frontloading the rate reductions for the remainder of the year. The shift in policy stance from “accommodative” to “neutral” suggests limited room for further policy easing in the current cycle.In a complementary move, the RBI also announced a 100-bps reduction in the CRR, expected to inject approximately Rs 2.5 trillion in durable liquidity into the system. This measure should bolster credit growth and further facilitate smoother transmission of the policy rate cuts, thereby supporting overall economic growth. The governor’s tone remained broadly dovish, underlining the central bank’s intent to prioritise growth.
The RBI’s decision to keep growth projections unchanged for FY26 at 6.5% was on expected lines. Our forecast however remains slightly more conservative, projecting FY26 growth at 6.2% amidst global headwinds and policy uncertainties.
On the inflation front, the RBI revised its projection downward to 3.7%, indicating a significant moderation in inflationary pressures. However, we continue to maintain a higher inflation estimate of 4% for FY26, considering weather-related risks. There are already early reports of crop damages in parts of south India from early monsoon this year which can add to the CPI inflation in coming months. Looking ahead, we do not anticipate any further rate cuts from the RBI unless downside risks to growth materialize”.
Dr. A. Sakthivel, Vice Chairman of the Apparel Export Promotion Council (AEPC), welcomed decision by the Reserve Bank of India (RBI) to reduce the Repo Rate by 50 basis points, bringing it down from 6% to 5.50%, along with a 100 basis points reduction in the Cash Reserve Ratio (CRR). This marks the third consecutive rate cut by the Reserve bank in recent months, aimed at bolstering economic activity.
Despite the reduction, the RBI has retained its GDP growth forecast at 6.5% for the fiscal year 2025–26, reflecting continued optimism about India’s economic strength and recovery momentum.
With this move, all External Benchmark Lending Rates (EBLR) — which are directly linked to the Repo Rate — are expected to decline accordingly. Historical patterns indicate that banks are likely to pass on the benefits to borrowers. For instance, after the April 2025 rate cut, several major banks promptly lowered their lending rates in line with the RBI’s action.
Dr. Sakthivel urged the RBI to ensure that commercial banks pass on the full benefits of the rate cut to exporters and consumers
This reduction will result in lower interest rates on retail loans, which will encourage spending and boost demand across various sectors,” he said. It will also reduce EMIs for existing borrowers, making housing loans, vehicle loans, and other credit facilities more affordable.
Dr. Sakthivel emphasized that this rate cut will provide vital relief to MSMEs, easing their repayment burden and supporting their long-term sustainability.
He also expressed his gratitude to Union Minister of Finance Smt. Nirmala Sitharaman and RBI Governor Shri Sanjay Malhotra for their leadership and proactive steps.
This move will help Indian exporters better withstand the intense competition in the international trade market, Dr. Sakthivel said.
The steep cut of 50 bps in Repo rate is expected to sharply impact the net interest margins (NIMs) of the banks and Q2FY2025 is expected to be the weakest. Thereafter, the pressure on NIMs is expected to decline with the benefit starting to flow in from Cash Reserve Ratio (CRR) cut and extent of cut taken by banks on their saving rate deposits while the term deposit rates will reprice downward with a lag, Sachin Sachdeva, Vice President, Sector Head – Financial Sector Ratings, ICRA Ltd.
Tribhuwan Adhikari, MD and CEO of LIC Housing Finance
“The 50-bps rate cut is a bold move by the RBI. A total of 100 bps rate cuts in quick succession since February 2025 signals a strong push towards accelerating economic momentum while keeping inflation well within manageable levels. These progressive steps along with the inflation easing and the growth forecast remaining steady at 6.5%, the rate cut is expected to significantly lower borrowing costs, thereby improving affordability for homebuyers across segments.
The monetary policy is becoming more balanced and forward-looking.
Expect good boost in the housing demand July onwards
This move by the RBI will likely catalyse a surge in home loan demand, especially the affordable housing segment. We expect a good boost in the housing demand July onwards, and are optimistic that this year will be good for the housing finance industry”
HP Singh, CMD, Satin Creditcare Network Ltd
RBI’s move to reduce Repo Rate by 50 bps sends a strong signal of the regulator’s confidence on the overall sound macroeconomics of India. With inflation under control, this move will translate into meaningful cost benefits for the end-consumers. We believe a 100 bps cumulative rate cut in 2025 so far, will set the momentum for a recovery in rural demand and enhance credit affordability for our rural borrowers.
Mr.Sudipta Roy, Managing Director & CEO, L&T Finance said:
“RBI’s Monetary Policy decisions this morning are an emphatic reassurance of policy focus on propelling economic growth to a higher aspirational trajectory, despite global uncertainties. Frontloading monetary stimulus in the form of jumbo rate cuts and aggressive CRR cuts will clearly boost credit demand while infusing durable liquidity in the financial system and lowering the overall cost of funds in the economy. This all-out effort to stimulate domestic demand and economic growth adds a positive bias to our growth expectations in the year ahead.”
Ajay Kumar Srivastava, MD & CEO, Indian Overseas Bank
“The RBI’s decision to reduce repo rate by 50 basis points to 5.50% and CRR by 100 basis points in four tranches indicates a strong and timely policy shift that aligns with balancing growth with price stability. Besides this, the revision in CPI inflation to 3.7% for FY26 also shows RBI’s confidence in inflation being aligned with its 4% target. The decision in CRR cut which is expected to release INR 2.5 lakh crore in primary liquidity, will ease credit conditions in the banking system. This overall policy reflects a well calibrated and thoughtful approach with the GDP projected at 6.5% in FY26 and a steady quarterly trend. The pickup in non-gold imports and 14% increase in gross FDI also indicate robust domestic demand and global investor confidence in India’s structural strength. We believe this policy decision is expected to provide the necessary drive for credit expansion in priority sectors which will fasten the inclusion economic growth.”
Niranjan Hiranandani, Chairman, NAREDCO & Hiranandani Group –
“The RBI’s proactive measures, including slashing the repo rate by 50 basis points to 5.50% and reducing the CRR by 100 basis points, mark a pivotal intervention to bolster India’s GDP growth amidst a fragile global economic environment. The liquidity infusion of Rs 2.5 lakh crores is set to drive capex expansion, stimulate demand, and catalyze growth across sectors. With a focus on leveraging India’s demographic dividend and accelerating digitalization, these steps underscore the RBI’s commitment to sustaining growth forecasts while reinforcing India’s position as a key pillar in the global economic landscape.”
For the real estate sector, this rate reduction is set to bolster credit lending, accelerate buying velocity, and enhance development momentum. The resulting decline in home loan interest rates will directly benefit homebuyers by improving affordability and cushioning their financial commitments. Lower mortgage rates make home ownership more attainable, driving greater demand and fostering stronger sales indices. Additionally, this move could spur refinancing activity and strengthen investment interest in branded properties known for their attractive returns, particularly among Grade A developers.
While the dynamics of real estate are influenced by broader economic factors, RBI’s commitment to maintaining a lower rate environment will rekindle market confidence, enabling growth in portfolio expansion and refinancing activities. This policy intervention reinforces confidence in India’s economic resilience and demonstrates the central bank’s strategic approach to supporting critical sectors like housing, which are key drivers of the nation’s overall growth momentum.”
Published – June 06, 2025 11:39 am IST