RBI Monetary Policy: D-Street Welcomes Slash In Repo Rate — Check Reactions

The Reserve Bank of India’s Monetary Policy Committee cut the repo rate by 25 basis points to 5.25%, delivering on expectations with a unanimous vote while maintaining a neutral stance. The move comes against the backdrop of global trade volatility and a weakening rupee, which recently breached the 90-per-dollar mark.

Market participants said the rate cut reinforces the RBI’s pro-growth approach. Nilesh Shah, MD of Kotak Mahindra AMC, noted that the decision aligns with expectations from a half-divided market, adding that to convince the other half, the RBI will need to undertake OMOs beyond what has been announced, including covering the long end of the curve. He said communication from the central bank will now be critical for ensuring yields reflect the rate cut.

Real estate experts expect tangible sectoral benefits if banks expedite transmission. Anuj Puri, Chairman of ANAROCK Group, said that a swift pass-through could bring a renewed surge in sales momentum that carries into the first quarter of 2026, with luxury housing expected to continue dominating the residential market next year.

Economists pointed out that the rate action was guided by the inflation trajectory. Radhika Rao of DBS Bank told NDTV Profit that the RBI has given clear weightage to inflation, enabling today’s cut, and that this is likely to be the final rate reduction of the cycle. She added that a pause looks more probable through 2026.

According to Anitha Rangan, Chief Economist at RBL Bank, the MPC’s 25-bp cut, neutral stance, Rs 1 lakh crore OMO and 3-year FX swap indicate that the RBI is front-loading easing while remaining mindful of risks. She said inflation being revised lower and growth higher shows that inflation is giving the central bank space to support activity. She added that the OMO signals sensitivity to G-sec yields, while the FX swap reflects awareness of currency pressures. While the neutral stance signals limited scope for another cut soon, continued support through OMOs and FX operations remains likely.

Garima Kapoor, Deputy Head of Research & Economist at Elara Capital, said the unanimous 25-bp cut is consistent with the RBI’s inflation-targeting mandate. She believes there is room for another 25-bp cut in the cycle, noting that inflation is expected to stay benign and that, despite strong GDP growth, there are no signs of overheating. She pointed out that inflation excluding gold, silver, food and petroleum products is at all-time lows outside the Covid period.

Nomura’s India Economist Aurodeep Nandi said the RBI resisted the temptation to target the rupee, deposit rates or growth, and instead adhered to its core mandate of inflation targeting. With inflation well below the 2% lower tolerance band, he said the 25-bp cut was appropriate. The liquidity injection announced alongside it, he added, shows the central bank’s intent to reinforce transmission rather than dilute the impact with half-measures typical at the end of easing cycles.