Context:
The Reserve Bank of India (RBI) cut the repo rate by 25 basis points, bringing it to 6%, marking the second consecutive rate cut in 2025. The policy stance has shifted to “accommodative”, signaling room for further easing to support economic growth.
GDP and Inflation Forecasts Revised
- GDP growth for FY26 has been lowered to 6.5% from the earlier 6.7%, reflecting caution amid global uncertainties.
- Inflation is now projected at 4%, down from 4.2%, indicating stronger price stability and a more comfortable policy space for the RBI.
Quick Rate Transmission in Focus
- RBI Governor Sanjay Malhotra emphasized the importance of quick transmission of the repo rate cut through banks to stimulate borrowing and investment.
- However, lending rates tied to the marginal cost of funds may take time to adjust.
Sectoral Impact: Real Estate and Auto Eye Revival
- Industries like real estate and automotive are expected to benefit from lower interest rates, with hopes of a demand revival following months of subdued performance.
- The rate cut acts as a strategic booster for credit-intensive sectors.
RBI Moves to Regulate Gold-Backed Loans
- The RBI issued a draft circular on gold loan norms, aiming to:
- Standardize gold loan regulations across financial institutions.
- Improve transparency, conduct standards, and borrower protection.
- Address concerns over lending practices and collateral handling.
Market Response: Bond Yields Tumble
- The bond market responded positively with yields falling to a 3-year low, as investors priced in a dovish outlook and lower borrowing costs.
Stability Assurance: IndusInd Incident Clarified
- The Governor reassured the public, labeling the recent IndusInd Bank issue as an “incident, not a systemic failure,” maintaining confidence in the financial system’s resilience.
The RBI’s April 2025 policy review reinforces its pivot toward growth, with calibrated rate cuts and improved inflation control. While challenges remain, especially from global uncertainties, the central bank’s approach balan
