In a major policy move, the Reserve Bank of India (RBI) on Thursday cut the repo rate by 50 basis points to 5.5%, marking the third consecutive reduction by the central bank. The decision was taken during the RBI’s Monetary Policy Committee (MPC) meeting, and was announced by Governor Sanjay Malhotra.
Inflation Outlook Revised to 3.7%
Governor Malhotra stated that the Consumer Price Index (CPI) inflation forecast for FY26 has been lowered to 3.7%, from the earlier estimate of 4%. This indicates a cooling inflationary trend, aligning with RBI’s accommodative policy stance aimed at supporting economic growth.
GDP Growth Retained at 6.5%
The RBI retained the GDP growth projection for FY26 at 6.5%, echoing its previous estimate for FY25. While the Indian economy is showing signs of resilience, the central bank cautioned that geopolitical tensions and unpredictable weather patterns remain significant headwinds.
“The balance of risks to the growth outlook appears even,” Malhotra noted during the press briefing.
What It Means: Impact on Borrowers and Markets
Following the 50 bps rate cut, lending rates linked to the external benchmark lending rate (EBLR) are expected to fall accordingly. This translates into lower EMIs for home, auto, and personal loans, offering relief to borrowers.
In the past, particularly during February 2025, most commercial banks had mirrored similar rate cuts promptly.
Meanwhile, the bond market is also likely to gain, as lower interest rates boost bond prices, attracting investors seeking capital appreciation.
Recent Economic Snapshot
- Repo Rate (Post-Cut): 5.5%
- CPI Inflation FY26: 3.7% (revised down from 4%)
- GDP Growth FY26 Forecast: 6.5%
- GDP Growth FY25: 6.5% (four-year low)
Conclusion
The RBI’s proactive stance through consistent repo rate cuts signals a shift toward a growth-supportive monetary policy, with inflation largely under control. As the economy navigates global uncertainties and domestic challenges, the central bank’s calibrated approach aims to strike a balance between stability and stimulus.