In a move that surprised many, the Reserve Bank of India (RBI) slashed the repo rate by 50 basis points, bringing it down to 5.5% — the lowest in three years. With this, the central bank has cut interest rates by a full 100 basis points since February 2025 in an aggressive bid to stimulate a slowing economy.
This marks the first instance of three consecutive rate cuts since the Covid-19 era, indicating a shift in focus from inflation control to growth revival.
For consumers and businesses, this is welcome news. Borrowers — whether homebuyers, car owners, or entrepreneurs — will likely see a reduction in EMI burdens as banks adjust their lending rates. For corporate India, the cost of capital eases, offering room for investment, expansion, and job creation.
The backdrop for this decision? A sluggish growth trend. India’s GDP has slowed to 6.5%, a four-year low, prompting the RBI to act decisively. “Monetary policy has limited space to support growth after back-to-back cuts,” Governor Sanjay Malhotra cautioned — signaling that future rate cuts may be limited.
With inflation revised down to 3.7%, the RBI has created room to support credit growth and investment. However, this aggressive rate-cut cycle may also pressure the rupee and affect capital flows, particularly if global interest rates stay elevated.
Still, for now, the RBI’s bold move is expected to boost consumer sentiment, energize the housing sector, and offer some cushion to India Inc.
Verdict: For individuals and businesses alike, now is the time to plan expansions, lock in cheaper loans, and ride the interest rate wave while it lasts.
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