RBI Cuts Repo Rate For Third Time In A Row

In a significant move aimed at spurring economic activity, the Reserve Bank of India (RBI) on Friday reduced its benchmark interest rate for the third consecutive time following the latest Monetary Policy Committee (MPC) meeting.

Announcing the decision, RBI Governor Sanjay Malhotra said, "The MPC has decided to reduce the policy repo rate under the liquidity adjustment facility by 50 basis points to 5.5%, effective immediately. Consequently, the Standing Deposit Facility (SDF) rate now stands at 5.25%, while the Marginal Standing Facility (MSF) rate and the bank rate are both adjusted to 5.75%."

This latest cut follows a cumulative 100 basis points reduction since February 2025. Malhotra noted that with these back-to-back rate cuts, the MPC now has limited room left to support growth amid evolving global uncertainties. "The MPC also decided to shift its stance from accommodative to neutral to better navigate the fast-changing global economic environment," he added.

The RBI continues to project India's real GDP growth for 2025-26 at 6.5%, with quarterly forecasts of 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.4% in Q4. Malhotra emphasized that risks to growth remain evenly balanced.

India's position as a key investment hub also remains strong, according to the governor. "With forex reserves at $691 billion-adequate to cover more than 11 months of goods imports-India's external sector remains robust," he said.

In its previous meeting in April, the RBI had trimmed the repo rate by 25 basis points, bringing it down from 6.25% to 6%.

"India's strength comes from the strong balance sheets of the five major sectors. The Indian economy offers immense opportunities to local and foreign investors. We are already growing at a fast rate. We aspire to grow faster," he explained.

In an EMI, Aman Trehan, Executive Director, Trehan Iris, said, "The RBI's 50 basis point reduction in the repo rate to 5.5% is a significant boost for the real estate sector. Lower borrowing costs will make home loans more affordable, enhancing buyer sentiment, particularly in the affordable and mid-income segments. Additionally, the 100 basis point cut in the Cash Reserve Ratio improves liquidity, enabling banks to pass on the benefits to consumers more effectively."