More Stories

Informist, Friday, Jun. 6, 2025

MUMBAI – Following is a compilation of first views of economists and market experts on the Reserve Bank of India's second bi-monthly monetary policy statement for 2025-26 (Apr-Mar) detailed on Friday:

BANKERS

C.S. SETTY, CHAIRMAN, STATE BANK OF INDIA

A 50 basis points policy rate cut, a staggered 100 bps cash reserve ratio cut and change of stance to neutral, the RBI Friday's monetary policy communication was action packed - innovative, out of the box and an unanticipated surprise. The RBI's Monetary Policy Committee has broadly addressed any concerns on slowdown in growth on account of global uncertainties and fully capitalised on the softening domestic inflation to deliver a frontloaded rate cut, staggered durable liquidity injection yet conserving the space for future action.

The policy is definitely positive for all sectors of the economy, particularly for banking and finance. In particular, lower cost of borrowing will act as a counterbalance to any uncertainty.
(Vidhushi RajPurohit)

ASHOK CHANDRA, MD AND CEO, PUNJAB NATIONAL BANK

The RBI's calibrated reduction in the repo rate and a shift to a neutral stance reflects a forward-looking approach to nurturing growth while maintaining price and financial stability. The decision to reduce the cash reserve ratio by 100 basis points in a phased manner is particularly significant, as it will enhance systemic liquidity and provide additional lending capacity to the banking sector.

With inflation trending lower and macro indicators showing resilience, this policy move will support credit offtake, boost investor sentiment, and further strengthen India's growth momentum. At Punjab National Bank, we see this as an opportunity to step up credit deployment, especially towards productive sectors and retail demand, while continuing to support micro, small and medium enterprises, retail, agri, and other priority segments. The Indian banking sector stands on strong fundamentals, and we remain aligned with the RBI's vision of fostering a stable, inclusive, and growth-led financial ecosystem.  

(Vaishali Tyagi)

V.R.C. REDDY, HEAD OF TREASURY, KARUR VYSYA BANK

RBI has clearly chosen to front-load policy support, aiming to fire up growth momentum and steer the economy toward its potential growth path, leveraging the currently supportive domestic macro conditions, including soft inflation and contained fiscal pressures.

While the change in stance to 'neutral' signals that future action will be data-dependent, the overall tone remains growth-oriented. RBI has acknowledged downside risks from global trade uncertainties, including the impact of recent US tariff moves.

The cash reserve ratio cut, though phased, will inject durable primary liquidity, easing systemic funding pressures and supporting faster transmission to lending rates, especially across retail, micro, small and medium enterprises, and housing segments.

With today's (Friday's) actions, we believe that the repo rate at 5.50% has likely bottomed out. However, the presence of abundant liquidity means the standing deposit facility will continue to act as the operative policy rate, guiding short-term money market behaviour. The market reacted calmly, while the 10-year benchmark bond yield is expected to trade in the range of 6.10% to 6.25%, factoring in the liquidity support and neutral stance.

In summary, the policy is a decisive, front-loaded, and liquidity-enhancing package, aimed at reviving credit flow, supporting growth, and maintaining financial stability, while keeping the door open to recalibrate as risks evolve. 

(Srijita Bose)

ECONOMISTS

NOMURA ECONOMISTS 

Today's (Friday's) policy decision constitutes a major surprise. The RBI's Monetary Policy Committee had just changed its stance to 'accommodative' at the April meeting, so a flip back to 'neutral' so soon suggests more nimble decision-making.

The combination of a 50-basis-point cut, a shift in stance to neutral, and the cash reserve ratio cut signals that the MPC believes the existing space for policy easing has been largely exhausted, and they will be in a wait-and-watch stance now, with policy transmission the key objective. This suggests that unless there are major economic surprises, the RBI will be on hold in August and beyond.

However, the policy outlook will depend on the macro outlook. We see downside risks to the RBI's GDP growth and CPI inflation outlooks. On our forecasts, GDP growth is likely to surprise lower at 6.2% (RBI: 6.5%), while CPI inflation is tracking even lower at 3.3% (RBI has now revised to 3.7%). Therefore, we do not view today's action as the end of the easing cycle. We continue to see the terminal rates at 5.00%, with a likely pause in August, followed by 25 bps rate cut in each of October and December.  

(Cassandra Carvalho)

ARSH MOGRE, ECONOMIST, PL CAPITAL

The committee delivered an outsized 50-basis-point cut in the policy repo rate, taking it to 5.50%, alongside a staggered but substantial 100 bps reduction in the cash reserve ratio, which will inject INR 2.5 trillion into primary liquidity over four tranches starting September. This dual action strategy far exceeded market consensus, which had largely pencilled in a 25-bps cut, and decisively signalled that the central bank is front-loading policy easing to proactively anchor growth, even as inflation remains well behaved.

In total, the RBI has cut rates by 100 bps in 2025, making this the sharpest cumulative easing cycle since the pandemic. From a real rate perspective, the cut meaningfully realigns monetary conditions. With forward inflation projected at 3.7% and the repo now at 5.5%, the real policy rate has compressed to 1.8% from over 2.8% earlier this year. This recalibration is intentional. By lowering both the repo rate and cash reserve ratio, the RBI has flattened the transmission curve, aiming to synchronise falling input costs with improving demand elasticity.

Contrary to fears that the stance shift to 'neutral' implies an end to easing, it should be interpreted as a calibration move to retain future optionality and prevent speculative froth. If inflation remains below 4% through Oct-Mar and transmission visibly improves, then there remains room for another 25-bps cut before the year-end.  

(Gowri Lakshmi)

SHILAN SHAH, DEPUTY CHIEF EMERGING MARKETS ECONOMIST, CAPITAL ECONOMICS

The RBI's decision to cut the repo rate by a larger-than-expected 50 basis points to 5.50% while also changing its policy stance from "accommodative" to "neutral" Friday are clear indications that it has frontloaded the remainder of the easing cycle, which is now at an end. In all, the repo rate has been trimmed by 100 bps in this cycle, in line with our long-held, dovish view.

The 10-year yield is down 10 bps or so since the announcement – suggesting that, like the vast majority of analysts, market participants were expecting a smaller repo rate cut. The cash reserve ratio has also been slashed by 100 bps.

In the event, the RBI has taken advantage of the chunky fall in inflation to frontload policy loosening. The headline CPI rate has dropped sharply in recent months from 5.2% in December to 3.2% in April. That has been largely due to a plunge in food inflation and predictions of a healthy monsoon augur for it to remain low. But food inflation is notoriously volatile; RBI Governor Sanjay Malhotra noted today that "we need to remain watchful of weather-related uncertainties".

On activity, Malhotra highlighted downside risks from the trade war but was otherwise relatively upbeat on economic prospects. He stated that "economic activity continues to maintain the momentum, supported by private consumption and traction in fixed capital formation". In general, we share his optimism – we recently revised up our GDP forecasts for 2025 and 2026.

Most telling, the Governor stated that "after having reduced the policy repo rate by 100bps in quick succession since February 2025, under the current circumstances, monetary policy is left with very limited space to support growth". Alongside the change in the policy stance, that's a strong signal that the easing cycle has now come to an end.  

(Shubham Rana)

FUND MANAGERS

RAJEEV RADHAKRISHNAN, CHIEF INVESTMENT OFFICER - FIXED INCOME, SBI MUTUAL FUND

The Monetary Policy Committee has clearly surprised markets with a big bang set of measures with a 100 basis point cash reserve ratio cut, and 50 bps repo cut. These clearly come from the perspective of frontloading actions to enable support to growth considering the lag effects of transmission. At the same time, the shift of stance to neutral has meant that the policy rates may possibly level off at 5.50% in the current cycle. However, this would remain a moving target with incremental data points likely to shape the outcome.

(Cassandra Carvalho)

UMESHKUMAR MEHTA, CHIEF INVESTMENT OFFICER, SAMCO MUTUAL FUND

A third straight cut in the repo rate this year, of 50 basis points instead of the estimate of 25 bps, is a pleasant move. This demonstrates a pro-growth stance and front-loading of rate cuts, given our stable economic growth and declining inflation. A change in policy stance from accommodative to neutral is also justified, as it can help strike a right balance between growth and inflation, especially if geopolitical issues escalate further. Today's policy levers are expected to boost consumption, stimulate domestic growth, and ensure liquidity among the varied global challenges.  

(Cassandra Carvalho)

MARZBAN IRANI, CHIEF INVESTMENT OFFICER - FIXED INCOME, LIC MUTUAL FUND

RBI has front-loaded the rate cut cycle by announcing a 50-basis-point repo rate cut. The terminal rate now stands at 5.50%. The change in stance from 'accommodative' to 'neutral' will limit downward movement of yields. The cash reserve ratio cut of 100 bps to 3.0% has surprised the markets and is expected to release liquidity of INR 2.5 trillion. The CRR cut will bring down yields at the shorter end significantly. RBI has reiterated that it is committed to ensuring price stability and is focused on supporting growth. Any further policy decision will continue to be data-dependent. We recommend investing in tenures ranging three months to three years to take advantage of the CRR cut.

(Cassandra Carvalho)

SIDDHARTH CHAUDHARY, HEAD OF FIXED INCOME, BAJAJ FINSERV ASSET MANAGEMENT CO.

Prior to the policy announcement, we had highlighted a strong likelihood of a 50-basis-point cut, noting that any further easing would depend on significant deterioration in global growth and trade conditions. With Friday's decision, short- to medium-term bonds are expected to perform well, supported by a substantial liquidity surplus following a 100 bps cut in the cash reserve ratio. Core liquidity surplus is now projected to be around INR 8 trillion. However, as market expectations approach the terminal rate, profit-booking is evident in longer-term bonds.

It is also worth noting that the pre-policy real interest rate of 2% was relatively high, especially in the context of heightened global uncertainties. Given the domestic growth-inflation dynamics, a more accommodative stance was justified to sustain economic momentum. With the FY26 inflation forecast revised downward to 3.7% from 4%, the real interest rate now stands at 1.8%, which remains elevated. Going forward, further rate cuts will only be feasible if inflation projections decline further in upcoming policy reviews.  

(Srijita Bose)

OTHERS

JAYANT B. MANMADKAR, CHIEF FINANCIAL OFFICER, BRIGADE ENTERPRISES LTD.

The Reserve Bank of India's decision to slash the repo rate by 50 basis points and lower the cash reserve ratio by 100 basis points will inject a significant INR 2.5 trillion into the banking system, providing essential liquidity to spur economic growth. It will boost the availability of credit and promote capital investments. The decline in home loan interest rates will offer additional relief to homebuyers as it will put more surplus money in their hands. It will subsequently benefit the growth of the real estate sector by instilling a sense of confidence in consumers.

(Narayana Krishna)

DEVARSH VAKIL, HEAD OF PRIME RESEARCH, HDFC SECURITIES

A 'jumbo' rate cut and a surprise 100 bps cut in cash reserve ratio is a great relief to the markets. This would infuse roughly INR 2.5 trillion liquidity in the system by November, which should directly support bank margins during the second half of 2025-26 (Apr-Mar). These will help in enriching and sustaining the growth momentum, and facilitate private investment.

External headwinds, including US tariff policies, global trade tensions, sluggish worldwide growth, and geopolitical risks, continue to pressure domestic growth prospects. This growth-inflation dynamic created strong justification for monetary easing.

This will provide a much-needed push for the Indian markets to move out of the current trading range beyond Nifty 50's 25000 level and head towards previous highs of 26200 points.  

(P. Madhu Kumar)

VENKATAKRISHNAN SRINIVASAN, FOUNDER, ROCKFORT FINCAP LLP

The RBI has clearly frontloaded its policy actions with a 50-basis-point repo rate cut, a 100 bps cut in the cash reserve ratio, and a shift in policy stance to 'neutral'.

This aggressive move raises the question: Have we reached the terminal repo rate? While it's too early to confirm, the magnitude of easing suggests we may not see further rate cuts in the near term. The CRR cut, being a powerful liquidity tool, is a significant positive for banks. No wonder banks stocks are moving up. It will free up lendable resources and is expected to support credit growth. However, this also brings into focus whether the RBI will now scale down its daily variable rate repo operations or pause open market operation auction purchases, given the enhanced systemic liquidity.

Despite the monetary easing, government bond yields haven't moved significantly--likely because markets are now waiting to see how banks deploy this liquidity. If banks begin channeling funds into mutual funds instead of lending, we could see a softening in corporate bond yields, particularly in the AAA space.

This is a welcome breather for debt mutual funds, hybrid funds, and liquid funds, which may benefit from the stabilising interest rate environment and improved liquidity. However, foreign portfolio investors are likely to remain cautious on Indian gilts and AAA-rated instruments, given the compressed yields and global interest rate uncertainties. 

(Cassandra Carvalho)

NARENDRA SOLANKI, HEAD OF FUNDAMENTAL RESEARCH-INVESTMENT SERVICES, ANANT RATHI SHARES AND STOCK BROKERS

The 50-basis-point cut that came out eventually was a positive surprise for the markets and the biggest takeaway is the CRR cut off 1% or 100 basis point over four equal tranches. That would again add significant liquidity into the banking system, which has the potential to decrease the cost of funds for banks, in turn reducing pressure on NIMs, which were actually dampening sentiment because of high competition in deposit mobilisation.

I think today's reaction has already signalled acceptance by the markets of the policy meet...from a medium to long-term perspective, I think we might be heading for a positive move in the coming quarters. Spending should also increase and overall economic growth should also pick up from here on. 

(Akash Mandal)

AMAR AMBANI, EXECUTIVE DIRECTOR, YES SECURITIES

A 25-basis-point rate cut by the Reserve Bank of India now appears to be a foregone conclusion. In addition to the rate cut, we see a possibility that the RBI may widen the liquidity adjustment facility corridor by increasing the spread between the repo rate and the standing deposit facility rate to 50 bps, up from the current 25 bps.

Such a move would aim to discourage banks from engaging in risk-free arbitrage—borrowing through the triparty repo market and parking excess funds in the SDF. Instead, it would incentivise greater lending activity. This adjustment in the corridor could help redirect surplus liquidity toward productive credit deployment, especially crucial at a time when credit growth momentum appears to be slowing.

(Sachi Pandey)

 End

Compiled by Vinodini Yadav

Filed by Tanima Banerjee

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985–4000

Send comments to feedback@informistmedia.com.

© Informist Media Pvt. Ltd. 2025. All rights reserved.