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Date: 06-jun-2025 | By: Nuztrend Team
In a significant monetary policy action, the Reserve Bank of India (RBI) on Friday announced a 50 basis points cut in its benchmark repo rate, reducing it to 5.50%. This marks the steepest cut in five years, signaling the central bank’s urgent push to stimulate economic activity amid persistent signs of slowing demand and fragile growth.
The decision, announced at the conclusion of the RBI’s Monetary Policy Committee (MPC) meeting, reflects mounting concerns over sluggish private consumption, below-target inflation, and global economic uncertainty. The repo rate—the rate at which the RBI lends money to commercial banks—serves as a key tool in managing liquidity and credit availability in the system.
With this rate cut, banks are expected to pass on the benefits to customers, resulting in lower EMIs on home, auto, and personal loans. Financial experts suggest this move could also offer a boost to the real estate and auto sectors, both of which have been facing demand-side challenges.
This 50 bps cut is the sharpest since 2020, during the COVID-19 pandemic-era stimulus cycle. Analysts see this as a clear departure from the RBI’s previous cautious stance, indicating a shift toward growth-centric measures despite moderate inflation figures that remain close to the central bank’s 4% target.
Indian stock markets responded positively to the announcement. The BSE Sensex climbed over 300 points during intra-day trading, while the Nifty Bank index saw increased activity as rate-sensitive sectors rallied.
Bond yields also dipped as traders priced in the prospect of extended monetary accommodation. Economists speculate that the RBI may leave the door open for another rate cut later this year if macroeconomic conditions do not improve.
With external headwinds such as global oil price fluctuations and geopolitical tensions still looming, the RBI’s decision signals a proactive attempt to shield the domestic economy from external shocks while reigniting domestic demand.
The central bank has maintained an “accommodative” policy stance and emphasized continued vigilance over inflationary risks. The next MPC meeting is scheduled for August, and market watchers will be keeping a close eye on credit growth, manufacturing data, and rural consumption trends.
Friday’s rate cut is a clear indication that India’s central bank is ready to act decisively in the face of a sluggish recovery. Whether it succeeds in jumpstarting growth remains to be seen—but for now, the message is clear: the RBI is putting growth front and center.
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