RBI cuts repo rate by 25 bps to 6.25% after 5 yrs; industry welcomes move

This is the first time in five years the RBI has reduced the repo rate.

The last time when the rate was reduced was in May 2020.

RBI Governor Sanjay Malhotra said India is not immune to the challenging global economy, which is growing at a slower rate.

Industry reactions

V. P. Nandakumar, MD & CEO, Manappuram Finance

The RBI's 25 basis point cut in the repo rate to 6.25%, after five years marks a pivotal move to boost liquidity in the financial system.

With the Standing Deposit Facility now at 6% from 6.25% and the Marginal Standing Facility and Bank rates at 6.50%, this decision is expected to ease borrowing costs and fuel credit demand.

It offers a timely boost for sectors such as housing, MSMEs, and consumer finance, positively impacting individuals and business in their growth journeys.

Harshavardhan Neotia, Chairman, Ambuja Neotia Group

A reduction in the repo rate by 25 basis points to 6.25% is a positive step toward boosting credit availability and making home loans more accessible. Along with recent tax incentives, this move is expected to drive spending and investment.

Lower borrowing costs will also encourage capital expenditure in luxury hospitality, fostering premium resorts, boutique hotels, and lifestyle destinations.

Improved liquidity will empower developers, spur tourism, create jobs, and strengthen economic growth, instilling confidence in long-term investments.

Sanjay Dutt, CEO and MD, TATA Realty and Infrastructure 

The RBI’s decision to cut the repo rate to 6.25% is a welcome move that stands to make home loans more affordable, thus easing the financial burden on aspiring homeowners.

While the realty sector has been witnessing a robust demand and positive sentiment for premium and luxury residential real estate, a reduction of 25 basis points will immensely benefit the affordable housing segment, especially in Tier 2 and 3 cities, aligning with the government's vision of inclusive growth and urban development.

Coupled with the government’s progressive budget measures, including tax benefits and infrastructure investments, this will further accelerate consumption-led growth for the industry.

Moreover, the rate cut is set to further enhance liquidity in the banking system, enabling developers to manage raw materials while also gaining easy access to financing for their ongoing projects and plan new ventures.

Overall, the announcement stands to ensure sustained momentum across the real estate sector, encouraging investments and amplifying its contribution towards the Indian economy.

Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India

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. 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.”

Girish Kousgi, MD & CEO, PNB Housing Finance

The RBI’s decision to cut the repo rate by 25 basis points the first rate cut since 2020 is a significant move that will provide much-needed relief to home loan borrowers and give a strong boost to the housing sector.

Lower interest rates directly enhance affordability, making home loans more accessible for aspiring homeowners and first-time buyers.

This decision aligns with the Finance Ministry’s recent budget announcement, which emphasized the need for fiscal and monetary policy to work in tandem to support economic growth.

The rate cut is expected to drive renewed demand in the housing market, boosting overall sentiment and encouraging investments in the real estate sector.

We remain committed to supporting homebuyers with competitive loan offerings and seamless financing solutions, both in-person and digital, ensuring they can achieve their dream of homeownership.

This rate cut, combined with the recent income tax relief, will further strengthen consumer confidence and contribute to sustained growth in the housing finance sector.

Lakshmanan V, Group President & Head - Treasury (treasurer), Federal Bank

The MPC was on reasonably expected lines on all counts - Rate cut, stance and statement on liquidity measures.

This decision in my view was a logical extension to the liquidity measures taken in Jan, along with clear assurances given by RBI to support liquidity whenever necessitated going forward.

Todays outcome sets the stage for rate cut expectations in April, unless the Inflation and global macro play havoc.

Vijay Kuppa, CEO, InCred Money

By cutting rates, the RBI is making borrowing cheaper, which in turn should spur investments, business expansion, and consumer spending.

For individuals, this means lower EMIs on home and business loans, making big-ticket purchases more attractive. But on the flip side, fixed deposit rates may soften, discouraging savings and pushing people to either spend or invest in equities. The stock market, already buoyant, could see further gains as liquidity improves.

This move also ties in well with the recent Union Budget’s tax relief, which raised the rebate limit from ₹7 lakh to ₹12 lakh. More disposable income, coupled with lower borrowing costs, creates a perfect recipe for stronger household consumption—one of India’s biggest growth drivers.

That said, the RBI is staying neutral on its policy stance, meaning it’s watching global risks carefully before making further moves. For now, this rate cut is a well-timed boost that aligns with India’s growth ambitions. And with both monetary and fiscal policies pulling in the same direction, the coming months could see stronger momentum across sectors.

Deepak Ramaraju, Senior Fund Manager, Shriram AMC.

The RBI cut the repo rate by 25 bps. This was a welcome move given the slowdown in the economy and has been timed appropriately.

India’s GDP is expected to grow at 6.3% to 6.6% for FY 26 and the monetary policy committee expects the inflation to moderate to 4.26% for FY 26.

Given the weakness in Rupee against the USD Dollar and the uncertainty of tariff by the US government, RBI might delay future rate cuts. RBI will be watchful on the incoming inflation data and the currency movement before taking future rate cuts.

As per our expectation, April could be status quo of the interest rates.

As the government cut the taxes for the middle class and now RBI bringing down the cost of borrowing, it augurs well for a strong consumption-led growth. Discretionary spending and premiumization themes are expected to outperform.

Sectors like automotive, real estate, and discretionary segments such as jewellery, durables and white goods might do relatively better.

Travel and tourism, quick service restaurants could also see the demand remaining buoyant. As the demand grows, the cut in interest rates could be positive for private capex as well.

This might reduce the burden of the government from the heavy lifting of capital expenditure. Overall, tax cuts and the lower cost of interest are the key ingredients for the stronger and structural growth in the years to come.