The Monetary Policy Committee (MPC) under the chairmanship of Sanjay Malhotra, Governor, Reserve Bank of India on Friday (June 6, 2025) voted to reduce the policy repo rate by 50 basis points (bps) to 5.50% with immediate effect. 

Consequently, the standing deposit facility (SDF) rate under the liquidity adjustment facility (LAF) shall stand adjusted to 5.25% and the marginal standing facility (MSF) rate and the Bank Rate to 5.75%. 

Here we give the reactions from industry circles

“The Reserve Bank of India’s decision to reduce the repo rate by 50 basis points to 5.5% underscores a clear commitment to supporting growth,” said Yashish Dahiya, Chairman & Group CEO of PB Fintech.

“Coupled with the shift to a neutral stance, it signals a more balanced and measured approach going forward. This move will ease borrowing costs and enhance liquidity, benefiting MSMEs and retail loan borrowers. Overall, we believe this step will positively influence India’s economic momentum amid global headwinds.”

50 bps rate cut to boost real estate, broader economy:

Shishir Baijal, Chairman and Managing Director, Knight Frank India, commenting on the announcement made by the RBI’s Monetary Policy Committee, said: The RBI’s 50 bps rate cut marks a strong and proactive stance aimed at lifting the low and mid value housing segments. Over the last few years, the strong housing market momentum was increasingly concentrating in the premium end even as there were signals of weakening the lower segments. With this cumulative 100 basis point cut in the policy interest rate we expect rekindling of the lower segments as affordability will witness a meaningful improvement for such homebuyers. We hope that the developer community too renews its focus in a big way to give longer legs to this housing market upcycle which is in its 5th year. Liquidity conditions remain balanced and conducive to supporting this monetary stance and we hope to see a greater transmission of this rate cycle.

Binod Kuma, MD and CEO of Indian Bank: The RBI’s decision to cut the repo rate by 50 basis points to 5.50% while changing its stance to neutral will boost credit demand in sectors like Retail, Agriculture and MSME. It will also encourage private capex. CRR cut will provide liquidity at the hands of banks. RBI is taking very proactive steps keeping in view looming headwinds on credit growth. Lower rates will spur the retail demand especially for affordable housing. Good monsoon coupled with lower rates augurs well for agriculture sector. It will drive consumption and will boost rural demand. MSMEs, which are vital to India’s economy, will see improved cash flow and more room to grow.

Ensure transmission

We will ensure to pass on rate transmission immediately to support entrepreneurs and keep the economy moving forward.

Anuj Puri, Chairman – ANAROCK Group

As widely anticipated, the RBI decided to reduce the repo rates by 50 bps (to 5.5%) to the backdrop of moderating inflation in the country. This is the third consecutive time this year that the apex bank has cut the repo rates. This effectively lowers the cost of borrowing, making home loan EMIs easier on the pocket and thereby directly improving affordability for buyers. This can potentially boost demand in the Indian real estate sector, especially in affordable and mid-income segments. Affordable housing faced the sharpest pandemic fallout, with sales and new launches shrinking in the top 7 cities.

ANAROCK data shows that affordable housing sales share plummeted from 38% in 2019 to 18% in 2024, while its supply share dropped from 40% to 16% in the same period. However, a 19% dip in unsold stock hints at sustained demand led by end-users. It will also lower developers’ borrowing costs. It is sincerely hoped that banks pass on the benefits of this move seamlessly to borrowers.

The reduction in the Cash Reserve Ratio (CRR) will help boost liquidity in the banking system, which means that banks have more funds to lend. Developers will be able to access more capital for their projects, and this can positively impact project completion timelines. It also gives banks the option to reduce home loan interest rates, which will have again positively impact sentiment in the affordable and mid-income segments.

Nevertheless, these positive impacts may be partially dampened by the ongoing global trade tensions and tariffs imposed by the Trump administration, which have increased the cost of imported construction materials and created economic uncertainty. We may see some impact on the demand for luxury and commercial projects, and developer margins may be squeezed.

While the rate cut is a strong positive for real estate, especially for affordable housing, much now depends on how well it can adapt to higher input costs and ongoing global uncertainties. Continued policy support and a shift to domestic sourcing could be critical for sustained growth.

Upasna Bhardwaj, Chief Economist, Kotak Mahindra Bank said, “The higher than expected repo rate cut comes along with a shift in the stance back to neutral. This clearly points towards future decisions being more data dependant given the significant global uncertainties. Furthermore, the sharp drop in CRR is likely to keep liquidity conditions suitably comfortable to ensure monetary transmission.”

Ranen Banerjee, Partner and Leader, Economic Advisory, PwC India.

The MPC has delivered an unexpected outsized policy rate cut of 50bps against a consensus expectation of a 25bps cut. This is accompanied by a 100bps staggered cut in CRR and a change in policy stance to neutral. The decision is likely owing to the GDP prints for Q4 of FY25 reflecting weakness in manufacturing and consumption, as well as the adverse impacts of global trade and conflict headwinds. The policy rate easing, combined with the liquidity increase for banks when system liquidity is already comfortable, is likely to add a second engine to the consumption growth flight that is anticipated to be already in flight from the income tax cuts taking effect in FY26. This is significantly positive for urban consumption, which printed weak in past quarters, and will also likely add a fillip to real estate, discretionary purchases, and private capex.