With the Reserve Bank of India (RBI) scheduled to hold its bi-monthly monetary policy committee (MPC) meeting on June 4, the central bank’s governor, Sanjay Malhotra, is expected to announce results of the meeting on Friday. It’s anticipated that there will be at least 25 basis points (0.25 per cent) or 50 basis points (which is 0.5 per cent) rate cut, further encouraging India’s credit cycle and boosting growth even though there will be a lag between implementation and effective results.
RBI has been on a rate-cut mission since February this year, when it announced a 25 basis-point cut, shifting its stance from ‘Neutral’ to ‘Accommodative’.
An SBI research has predicted a cumulative rate cut over the cycle to touch 100 basis points to keep domestic growth momentum intact.
Who profits from the rate cut?
The RBI purchased government bonds worth ₹5.3 trillion from December 2024-end to May 2025. With a reversal in its tightening norms, the focus has been to push industry growth. In February 2025, the IIP growth slowed to 2.9%, down from 5.2% in January, according to the Economic Times. Those who profit from interest rate cuts the most are industries and businesspeople, since borrowing becomes easier and trade flourishes. As consumption increases, so does growth.
The other sectors expected to show positive results are housing, cars and two-wheeler sales.
However, all rate cuts come with the imminent danger of increasing inflation, which, so far, has remained within tolerance band. Headline CPI inflation has stayed below February’s 4 per cent target; food inflation has slowed down and core inflation has been subdued for two years.
Who feels the burn?
Those who feel the brunt of interest rate-cuts are retirees and fixed-income group individuals, for whom borrowing money for personal loans turns out to be more expensive.
The only potential headwinds to growth are expected from tariff uncertainty, slowed urban consumption, and private corporate capex.
What next?
However, as economic growth pulsates, the RBI tunes down the rate-cuts and ensures the public does not feel the pinch of inflation. However, experts see space for further rate cuts over the year, with terminal rep rate reaching 5.25 per cent in FY 26.
Also Read: RBI'S third rate cut likely to be announced on Friday
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