RBI delivers 50 bps rate cut, industry hails move as growth catalyst

Governor Sanjay Malhotra also revised the retail inflation outlook downward to 3.7% and projected GDP growth at 6.5% for the current fiscal. Industry leaders welcomed the move, calling it a timely boost for growth and consumption.

Anarock Group Chairman Anuj Puri said the widely anticipated move by RBI effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers.

The third consecutive rate cut, which comes on the backdrop of moderating inflation in the country, 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, he said, adding 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,” he remarked.

“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,” he noted.

With ongoing global trade tensions and tariffs imposed by the Trump administration, the cost of imported construction materials has increased and economic uncertainty, he said. “We may see some impact on the demand for luxury and commercial projects, and developer margins may be squeezed,” he noted.

“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,” he underscored.

Anitha Rangan, Economist, Equirus Securities, said the RBI has shifted the stance to neutral from accommodation with the jumbo cut of 50 bp.

“It was just the previous policy that RBI changed its stance, emphasizing  that the future direction will be cut. However, in this policy citing that there is limited to space to cut, RBI has reversed its previous dovishness,” Rangan commented

However, an alternate bout of dovishness comes from the 100 bp cut in CRR in four tranches of 25 bp each over the course of the year which will release INR 2.5 lakh crores of liquidity. This is meant to speed up the rate cut transmission which is slow as of now, she remarked.

A brake on further rate cuts suggests that RBI is finally concerned about FX but to keep domestic growth engine running, continuing to give liquidity boost. Inflation has been revised downward to 3.7% from 4% while growth for FY26 is unchanged at 6.5%.

“However, it appears that it is no longer about growth-inflation – it is about external versus internal. Front loading is necessary for growth but externalities is keeping further cuts away. Do what it takes now – risks will be managed down the road,” she noted.

Dr. Poonam Tandon, Chief Investment Officer IndiaFirst Life, said the 50bps repo rate cut and a 100bps cut on the CRR was quite unexpected by the market, which had pencilled in a 25bps repo rate cut.

Further, the change of the stance of the monetary policy has been shifted from Accommodative to Neutral and the MPC therefore front loaded the rate cuts and liquidity measures as well.

“This means that there will be a long pause and, therefore, no further rate cuts unless growth surprises on the downside,” she underscored.

“GDP has been maintained at 6.5%. CPI expectations moderated to 3.7% vs 4.0% earlier. Overall, the MPC has tried to accelerate monetary action for faster transmission,” she stated.

Vishal Goenka, Co-Founder of IndiaBonds.com, said, “A hawkish Deep rate cut by RBI : Front loading of rate cuts by RBI addresses the need to spur growth as short end rates come down aggressively which in turn will assist corporate borrowing through capital markets for the short end.”

However, we see a large curve steepening as long end rates remain relatively unchanged with RBI stance changing to neutral from accommodative.

This implies that further room to cut rates remain limited and data dependent.

“A balanced policy encouraging growth. Fixed deposit rates to come down sharply as banks transmit this rate cut. Investors should look at 2-3y corporate bonds for their portfolio as they continue to offer good spreads over government and FD rates and interest rates will come down more gradually for corporate bonds,” he added.

Kishore Lodha, Chief Financial Officer, UGRO Capital, called the MPC policy announcement is extremely positive.

“Durable liquidity has reached comfortable levels over the last two months, and the 100 bps CRR cut will inject more than ₹2 lakh crore into the banking system. This measure will further improve systemic liquidity while boosting bank profitability, as CRR balances don't earn any interest,” she added.

The RBI's successive interventions over the last 3-4 months to enhance system liquidity are paving the way for reviving robust credit growth, which had slowed last year, Lodha noted.

The rate cuts will benefit all borrower segments as we enter a lower interest rate cycle, he said.

“Bond markets have already priced in these rate cuts, with yields softening by nearly 100 bps over the past four months. However, banks haven't yet significantly reduced their MCLRs.

“Following today's cuts, we expect banks to lower their MCLRs accordingly. Loans linked to the repo rate will automatically follow this downward trajectory. Overall, these measures are extremely positive for the economy,” he noted.

Rakesh Reddy, Director, Aparna Constructions said the initial 50 basis point cut earlier this year reduced the repo rate to 6%, and the latest cut of 50 basis points brings it to 5.50% - boosting housing demand, spurring investments, improving domestic liquidity and financial stability.

“This, alongside recent tax benefits, strategically enhances affordability and demand across housing segments. Better access to affordable capital will also create financial flexibility for developers, drive better project execution, and influence growth and investment in India’s critical real estate engine which is anticipated to surpass US$ 10 trillion by 2047,” he noted.

Moreover, reducing the Cash Reserve Ratio to 3% from 4% is expected to inject ₹2.5 lakh crore by November 2025, lowering banks’ funding costs, accelerating monetary policy transmission, and boosting credit availability for developers and homebuyers.

While repo rate standing below 6% after many years is a moment of celebration, it is crucial to monitor and facilitate the effective transmission of these benefits to both consumers and developers on time, as inadequate policy transmission in the past has often diluted the intended impact of such rate cuts.

We also feel that there is a need to return to the range of 5% as it has the potential to unlock a new wave of homeownership, driving broader economic participation and market growth.

Vijay Kuppa, CEO, InCred Money, today’s decision by the Monetary Policy Committee (MPC) reflects that the central bank is now firmly focused on reviving growth.

Inflation has dropped sharply — CPI came in at 3.2% in April, the lowest in nearly six years. Food prices have eased consistently for six months, and even fuel inflation has reversed mildly.

With a strong rabi harvest and early monsoon, the RBI now expects inflation for FY26 to average just 3.7%, down from 4% earlier.

With inflation under control, supporting growth is the main objective especially considering the uncertainty in global trade. The RBI continues to peg FY26 growth at 6.5%, but clearly sees a need to stimulate private demand and capital formation.

The 50 bps rate cut, coupled with the 100 bps reduction in the Cash Reserve Ratio (CRR), injects much-needed liquidity into the system.

This gives banks more headroom to transmit lower rates and improve credit flow — both to consumers and businesses. It’s a timely and calibrated move.

The MPC has changed its stance from Accommodative to Neutral which means further rate cuts are not imminent. Any further action will depend on how inflation and growth dynamics evolve from here.

For borrowers, this is good news — EMIs will drop further. For investors, FD rates may slide, so locking in FDs & Bonds  may help before there is a material drop in the yields. For investors, this is a time to stay diversified. Volatility will remain as global events unfold, but falling rates also mean selective opportunities in debt and equity—with enough liquidity to act decisively when the right opportunities emerge."

Mahesh Agarwal, Managing Director, Purti Realty, said “The 50 basis points decline in repo rate to 5.5% coupled with 100 basis points decrease in Cash Reserve Ratio (CRR) by Reserve Bank of India, is a well-applauded step that will greatly reduce the borrowing costs. This change in policy rate is surely going to boost the economy by increasing access to home purchase through loans.”

At Purti Realty, we expect demand to go up sharply as lower EMIs increase access to homeownership in all segments, be it affordable, mid-segment or luxury.

“This monetary policy shift is designed to boost economic activity and enhance liquidity in the banking system, making credit more accessible and affordable—particularly for homebuyers—thereby driving investment and spurring greater participation in real estate and financial markets,” he said.

Ashwani Dhanawat, Executive Director & Chief Investment Officer, Shriram General Insurance Limited, said, “The significant 50 basis points cut in the repo rate, shows RBI’s focus to spur economic growth. This is the third consecutive rate cut by the central bank in 2025. The committee has signalled a recalibrated approach by shifting its policy stance from ‘Accommodative’ to ‘Neutral’, amid evolving economic dynamics.”

Also, another major move to enhance liquidity in the banking systems and stimulate credit growth is a cut in CRR by 100 bps, from 4% to 3%.

These decisions come at a time when retail inflation is at 3.16% is lowest since July 2019 and gives the central bank room to support economic momentum.

“The increased liquidity and push for economic growth could also stimulate demand for insurance products as businesses expand and consumers have more disposable income,” he added.