RBI Rate Cut Evokes Mixed Reactions

The fiscal year 2025-26 has begun on an anxious note for the domestic and the global economy. Some of the concerns on trade frictions are coming true, unsettling the global community. The RBI, while remaining alert to these global developments, began the year celebrating the completion of 90 years of its establishment. The apex bank’s journey over the last nine decades is closely intertwined with the nation’s development and progress.

As a custodian of monetary and financial stability, the Reserve Bank has evolved over the years into a full-service central bank with varied functions facilitating a market economy. The Monetary Policy Committee met on the 7th, 8th and 9th of April to deliberate and decide on the policy repo rate in the backdrop of a challenging global environment. This was the 54th meeting overall and the first meeting in the financial year 2025-26 of the MPC. The RBI on April 9, 2025, reduced the key interest rate by 25 basis points to 6% amid a mix of optimism and caution.

Mehul Kothari, AVP, Technical Research, Anand Rathi Shares & Securities: The 25 bps cut in the repo rate is a meaningful step, reflecting the RBI’s intent to revive growth momentum amid a cooling inflation outlook and rising global tariff headwinds. The shift to an ‘accommodative’ stance clearly signals the door is open for further easing, which I think is a pragmatic move given the lingering slowdown concerns.

Rate-sensitive sectors like real estate and autos could benefit, but the real impact hinges on transmission–and given past trends, that remains a bit of a question mark. The 6.5% GDP growth target for FY26 feels achievable and sensibly grounded. Overall, it’s a well-timed and balanced move, though one hopes it doesn’t end up being too little, too late given the global uncertainty.

Abhishek Jaiswal, Fund Manager at Finavenue: In recent policies, the Reserve Bank maintained a neutral stance, prioritizing inflation control while cautiously supporting growth, with GDP projections steady at 6.5–7% and inflation seen moderating around 4.5–5%.

However, with inflation risks easing and growth concerns resurfacing, the RBI has now pivoted towards a more supportive monetary path. The move signals a strategic push to stimulate demand and investment, while keeping a close watch on inflationary dynamics.

Ajit Mishra–SVP, Research, Religare Broking: The Reserve Bank of India, in its monetary policy meeting held on April 9, 2025, announced a series of proactive steps aimed at supporting economic growth amid mounting global uncertainties and subdued inflation. The standing deposit facility rate was lowered to 5.75%, while both the marginal standing facility and the bank rate were set at 6.25%.

In February 2025, the Consumer Price Index fell to 3.61%, well within the central bank’s target band of 4% ± 2%. The drop in inflation has created the necessary space for monetary easing, with the latest rate cut expected to reduce borrowing costs for both households and businesses, thereby aiding credit growth and demand revival. Overall, the RBI’s latest policy measures are aimed at preserving long-term macroeconomic stability while addressing near-term risks.

Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments: The 25 bps cut in policy rates and the shift in policy stance from neutral to accommodative are in tune with market expectations. Importantly this decision is unanimous. The message from the accommodative stance is that either rates will either remain the same or will decline further.

This time the monetary transmission will be more effective since there is ample liquidity in the system. The policy rate cut has not brought about any significant changes in bond yields due to the high US bond yields and the uncertainty in the global economy.

Dr Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings: Easing inflation, the manifest need to shore up economic growth and the evolving growth inflation trade-off necessitated 25 bps in the Repo Rate to 6% on top of the 25 bps cut in February 2025. As a consequence of this measure, all external benchmark lending rates would fall by 25 basis points, thereby providing welcome relief to borrowers in interest rate-sensitive segments, such as housing loans, auto loans, education loans, and other personal loans. In a future guidance measure, the Monetary Policy stance was shifted from “neutral” to “accommodative”.

Killol Pandya, Senior Fund Manager–Debt, JM Financial Asset Management: As expected by market participants, Reserve Bank of India (RBI) cut Repo rate by 25 bps, bringing the Repo rate to 6.00%, Standing Deposit Facility (SDF) at 5.75% and Marginal Standing Facility (MSF) at 6.25%. RBI expressed its view of a moderating growth and softening of inflation of the coming months, which bodes well for bond markets. However, it also reiterated the need for vigilance at this juncture, given the risks posed by the rising uncertainties regarding global macro-economic conditions and its potential impact on domestic conditions. As opposed to expectations of some market participants, RBI did not give any express guidance on market liquidity, but noted the present positive systemic liquidity conditions and reiterated its commitment to proactively

Marzban Irani, CIO of Fixed Income at LIC Mutual Fund: The RBI announced a 25-basis point rate cut, bringing the repo rate down to 6% from 6.25% which is in line with market expectations. The RBI assured that liquidity will be infused as required, offering comfort to the markets. Given the benign inflation outlook, the RBI is likely to focus on growth through monetary stimulus measures. Overall, the policy is viewed as positive for fixed income markets.

Ashwani Dhanawat, Executive Director and Chief Investment Officer, Shriram General Insurance: The Reserve Bank of India's decision to reduce the repo rate by 25 basis points to 6% and adopt an accommodative stance reflects a strategic pivot to support economic growth amid the escalating global tariff war. This policy shift, effective immediately, adjusts the SDF rate to 5.75% and MSF rate to 6.25%, aiming to stimulate domestic investment and consumption as trade frictions erode export performance and global growth decelerates. Market sentiment remains positive, though the efficacy of these measures will depend on navigating the complex interplay of global trade dynamics."

Rakesh Reddy, Director, Aparna Constructions: The RBI's approach to reduce repo rate marks a pivotal moment for the real estate sector, ensuring stability and propelling the market forward, while making homeownership more accessible. For developers, reduced financing costs will improve liquidity and enable smoother execution of projects, fostering growth in both residential and commercial real estate segments. We are anticipating increased investments and new project launches, creating value for homebuyers and investors alike.

Rohit Murarka, Business Head, Kotak Cherry: 'The unanimous 25 bps rate cut brings the repo rate down to 6.00%. This aligns with RBI’s ongoing efforts to support growth amidst rising global uncertainties. With inflation remaining well within target levels and ample liquidity in the banking system, the RBI had room to continue its easing cycle, and perhaps more importantly, the stance was changed from “neutral” to “accommodative” for the first time since early 2022.

Vipul Bhowar, Senior Director - Listed Investments, Waterfield Advisors: The RBI MPC announced a 25 bps reduction in the repo rate, bringing it to 6%. The inflation outlook has improved decisively. As projected, there is now greater confidence in the durable alignment of headline inflation with the target of 4% over a 12-month horizon, though the impact of Trump's "reciprocal" tariffs continues to loom large.

Given the challenges of slower growth in the Indian economy, the central bank was anticipated to persist in modifying its policies to promote stability."

Vaibhav Porwal, Co-Founder, Dezerv: This move is in line with our market expectations. It's important to note that this stance change does not directly imply increased liquidity; however, RBI has confirmed it will continue to manage liquidity as needed.

From The Common man

The repo rate is the level at which the RBI lends to banks, influencing borrowing costs. When the repo rate comes down, banks’ borrowing cost becomes cheaper. The common man must get its benefits. If banks reduce rates of interest on loans, and inflation remains under control, people can spend more, and borrow more. In line with the projections, there is now a greater confidence of a durable alignment of headline inflation with the target of 4% over a 12-month horizon.

“Indeed, the rate cut boosts optimism, and encourages people to borrow more provided banks support them. We remain upbeat about RBI’s decision, and the step is proactive, and in the right direction. We should get cheap home, auto, and personal loans, and our EMIs must come down. According to RBI, the repo rate cut is with immediate effect. But will all banks act quickly and pass on its benefits to customers? It’ a million dollar question. If they do, how soon, they will,” asks shopkeeper Kaushik Bhawsar.

I’ll go for a new personal loan, if banks reduce rates. But, I already have a fixed-rate loan, and struggling to pay EMI, as it’s very high, and I find it extremely difficult to make the ends meet. I understand this rate cut will help only new borrowers, it’s really pain, and no justice at all. The rate cut must be passed on to all customers including existing borrowers,” Falguni Gupta, a working woman, expressed her disappointment.

“I’m retiring next month, I must invest my pension in a financially healthy bank before banks reduce rates on fixed deposits,” Ragavendra Rao, a corporate manager, said.

Deposit rate cuts, in general, will affect pensioners, small, medium and high net worth individuals, and corporates. They will feel the pain, and premature withdrawals will result in penalty charges and diminished ‘actual’ returns. The reason for the slow pace in rate cuts by banks is mainly due to FY2024-25 balance sheet concerns. A major chunk is bank deposits, particularly, time deposits, which carry a higher contracted rate of interest.