The Reserve Bank of India (RBI) surprised the market on June 6, 2025, by slashing the repo rate by 50 basis points, bringing it down to 5.5%. In addition to this, it reduced the Cash Reserve Ratio (CRR) by 100 basis points, which will release around ₹2.5 lakh crore into the financial system. This bold move aims to stimulate economic growth amid signs of a slowing economy, while also making credit cheaper for borrowers. The decision is widely seen as a growth-focused step, especially given the positive outlook for inflation. RBI Governor Shaktikanta Das emphasized the central bank’s commitment to maintaining monetary stability while supporting growth. Lower interest rates often translate to more affordable loans for homebuyers, businesses, and the manufacturing sector, which could lead to increased demand across various sectors. Economists see this as a preemptive strike to shield the Indian economy from global headwinds such as geopolitical tension and weakening exports. The move also reflects confidence in domestic price stability, as the RBI projects consumer inflation at 3.7% for FY26, well within the comfort range. Investors are responding positively, especially in rate-sensitive sectors like banking and real estate, which are expected to benefit from cheaper financing. From a market perspective, this rate cut could also lead to greater foreign institutional inflows, as investors view India’s economy as increasingly accommodative and growth-driven. In short, the RBI’s latest policy signals a firm push toward economic revival while keeping inflation under check, which could serve as a long-term catalyst for India’s financial and industrial sectors.
