RBI Monetary Policy 2025 HIGHLIGHTS: RBI cuts repo rate by 25 bps for the first time in 5 years; FY26 GDP seen at 6.70%, FY26 inflation likely at 4.2%

Dhiraj Relli, MD & CEO, HDFC Securities, said, “In a watershed moment for India's monetary landscape, under the leadership of the new governor Mr. Malhotra, Reserve Bank of India (RBI) announced a significant shift in its policy framework on Friday, effecting a reduction in the policy repo rate by 25 basis points to 6.25 per cent - marking its first such intervention in half a decade. The monetary policy committee's decision reflects a delicate balance between fostering economic growth and maintaining price stability, whilst simultaneously addressing the emerging challenges in the global economic landscape. This rate cut coupled with recent income tax sops heralds particularly auspicious tidings for prospective homeowners. This calculated move is expected to catalyse credit growth across sectors, particularly benefiting SMEs whilst providing much-needed impetus to the real estate sector through reduced borrowing costs.”

Rajiv Sabharwal MD and CEO, Tata Capital, called the RBI’s move to reduce the repo rate a well-calibrated step that reflects confidence in India’s economic resilience while maintaining financial stability. “This move will ease borrowing costs, supporting credit expansion, particularly in rural and semi-urban segments, where demand continues to strengthen. At the same time, the increase in the SDF (standing deposit facility) rate signals the central bank’s commitment to managing liquidity amid evolving global uncertainties. The policy direction coupled with fiscal measures in the FY26 Budget—will provide impetus to key sectors, including MSMEs and manufacturing,” he said.

The new RBI Governor and the MPC delivered the widely accepted 25bps policy rate cut with policy stance as neutral leaving room for it to take further actions in its next meeting. Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India, said, “The MPC would have got comfort from the expectation of a moderating food inflation and under check core inflation giving an inflation estimate for FY26 at 4.2%. It has delivered the required monetary policy support to the economy and this combined with the consumption boost from the tax relief announced in the budget should give momentum to demand and pushing the FY26 growth rate to the higher end of the 6.3% to 6.8% growth range anticipated in the Economic Survey.”

Rohit Murarka- Business Head, Kotak Cherry, said, “Monetary policy has moved in tandem with fiscal policy to provide demand side push to the economy. Today's rate cut will provide a much required fillip to both the corporate and consumer sector. Importantly, RBI has kept the monetary policy stance as neutral and has maintained the inflation Outlook.”

Debopam Chaudhuri, Chief Economist, Piramal Group, said, “Encouraging to note an unanimous view among MPC members regarding the need for rate cuts. I hope this will continue over the next few meetings. RBI is leaving no stones unturned to ensure prompt transmission in this phase of rate cuts. Massive liquidity boost over the last few weeks resulted in the weighted interbank call rate to close below the repo rate a day before policy announcement. However, in my opinion the transmission will be delayed than usual, especially through bank loans linked to MCLR. It is likely that some of the banks could increase the share of MCLR loans over EBLR, to preserve margins at a time when deposit mobilisation remains sluggish.”

In the backdrop of weakening growth momentum whilst acknowledging the uncertain global macro-economic backdrop, the RBI’s MPC cut policy repo rate by 25 bps, Garima Kapoor, Economist and Executive Vice President, Elara Securities, said, is inline with expectation. “The stance of the policy was retained at neutral reflecting the global volatility which has been affecting EM currencies, particularly the Rupee which has seen sharp depreciation of over 2% this calendar year. The tone of the policy was neutral but the remarks of the Governor regarding some of the macro-prudential draft guidelines suggests that the current RBI dispensation is likely to be more pragmatic regarding implementation of the same. The assurance of liquidity provision was also comforting and suggests measures are likely to continue through OMOs and swaps," she said.

Deepak Agrawal, CIO- Debt, Kotak Mahindra AMC, said, “Finally, after keeping it on hold for almost 2 years, RBI MPC decided to cut the policy rates by 25 bps in line with market expectations, while keeping stance at neutral. RBI has guided to ensure sufficient durable liquidity in the system and will take pro-active measures for the same. Rate cut along with assurance on liquidity should help in boosting consumption and revive growth. Inflation target has been pegged at 4.2% and GDP Growth is pegged at 6.7% for FY2025-26. As policy was on expected line and no immediate measure for on liquidity front,10 years G-sec has reacted by moving 4~5 bps higher post the policy announcement. We continue to expect an incremental 25 bps rate cut till June 2025.”

Dr Aurodeep Nandi, India Economist, Executive Director at Nomura, said, “We have been arguing for a while now that growth faces strong headwinds, underlying inflation is low and high policy rates have outlived their utility. So the RBI’s policy pivot was long due and in line with our expectations. While Governor Malhotra suggested data dependence in his policy speech, we expect that this is the start to a deep rate cut cycle – we see another 75bp of rate cuts in the pipeline this year.”

The RBI governor said that global uncertainties are the central bank’s higher worries. “It is because it has a direct impact on growth, investment decisions, and consumption expenditure . Global uncertainties are the underlying cause for appreciation of the dollar,” he said.

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Suman Chowdhury, Executive Director & Chief Economist, Acuité Ratings & Research, said, “RBI has finally opted for the pivot by announcing a 25 bps cut in the benchmark repo rate after two years. However, it has maintained the existing neutral stance amidst the volatile external environment. The cut has been driven by increasing concerns on the growth momentum in the economy particularly “subdued urban consumption”.

RBI has estimated the GDP growth for FY26 at 6.7%, a moderate improvement over the 6.4% estimated for FY25. RBI MPC has taken a favourable outlook to the inflation trajectory with a forecast of 4.2% for FY26, a 60 bps reduction to the estimate of 4.8% for FY25. The tone of the governor’s speech seems to suggest that the approach to inflation targeting will be a little more flexible.

RBI has also provided comfort on the liquidity scenario albeit no new steps have been announced. It has also clarified that the intervention in the forex market will be measured based on excessive and disruptive moves in the currency.

We believe that RBI MPC has initiated a shallow rate cycle with low visibility and limited clarity on the future rate cuts. The retention of the neutral stance highlights that the policy direction may be revised depending on the incoming data points and the external environment.”

Vishal Raheja, Founder and Managing Director, InvestoXpert, said, “Lower borrowing costs will enhance homebuyer sentiment, making housing loans more affordable and boosting residential sales. The tax relief announced in the Budget, coupled with this rate cut, will increase disposable income and potentially revive demand in the housing sector. Earlier, a repo rate cut has led to a reduction in home loan interest rates, encouraging fence-sitters to make purchase decisions. Given that real estate contributes nearly 7% to India’s GDP and is projected to reach 13% by 2030, this move could provide the momentum needed for sustained growth in the sector.”