The Reserve Bank of India on Friday reduced the benchmark repo rate by 50 basis points to 5.5 per cent, marking the third straight rate cut and signalling a more cautious monetary outlook by shifting its policy stance from accommodative to neutral.
The decision, announced by RBI Governor Sanjay Malhotra following the conclusion of the Monetary Policy Committee’s three-day meeting, reflects the central bank’s assessment of diminishing monetary headroom amid changing economic dynamics.
"After a detailed assessment of the evolving macroeconomic and financial developments and the economic outlook ahead, the MPC decided to reduce, which is rightly expected, under the Liquidity Adjustment Facility by 50 basis points to 5.5%. Consequently, the Standing Deposit Facility rate, which is the SDF rate, shall stand adjusted to 5.25%," Malhotra stated.
This is the third reduction in the policy rate in as many meetings. In April, the MPC had trimmed the repo rate by 25 basis points, continuing its effort to bolster economic growth in a period marked by uneven global recovery and persistent inflationary pressures.
Of greater significance, however, was the committee’s decision to change its policy stance, reflecting a reassessment of the economy’s monetary needs. "After having reduced the policy repo rate by 100 basis points in quick succession since February 2025, the Monetary Policy Committee also felt that under the present circumstances, monetary policy is now left with very limited space to support growth. Hence, the MPC also decided to change the stance from accommodative to neutral," Malhotra said.
Also read: A lowdown on what RBI's lowering of basis points means for you
The Governor further underscored that the central bank would adopt a data-dependent approach in forthcoming decisions. “The fast-changing global economic situation too necessitates continuous monitoring and assessment of the evolving macroeconomic outlook,” he said, indicating a more guarded approach in coming quarters.
The repo rate – the rate at which the RBI lends short-term funds to commercial banks – now stands at its lowest level since the beginning of the rate-cutting cycle earlier this year. Analysts say the move is largely in line with expectations and reflects the RBI’s attempt to balance growth impulses with inflation containment.
The real estate sector welcomed the decision. Dharmendra Raichura, Vice-President and Head of Finance at Ashar Group, said the rate cut would bring relief to homebuyers and boost housing demand. “For homebuyers, it translates to lower home loan interest rates, making homeownership more affordable and accessible. This is especially encouraging for first-time buyers and those looking to upgrade,” he said.
He further noted that the rate cut would improve buyer sentiment and allow developers to roll out new projects with greater confidence. “Overall, the rate cut sets the stage for a more vibrant market, benefiting both homebuyers and developers alike,” he added.
The RBI’s policy signals come at a time when major central banks globally have adopted a cautious wait-and-watch mode. The Indian central bank’s neutral stance indicates that further easing may not be imminent, particularly as inflation risks remain and external uncertainties continue to cloud the economic horizon.
Market participants will now be closely watching both domestic data releases and global cues to gauge the future trajectory of monetary policy.
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