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RBI Cuts Repo Rate to 5.5% and CRR to 3% as Banks Slash Lending Rates

The liquidity boost is designed to bolster credit following inflation’s steady decline

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Illustration: Manali Ghosh | ThePrint
RBI's 'Aggressive' Rate Cut | Image: Republic
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Overview

  • The RBI reduced its policy repo rate by 50 basis points to 5.5% and lowered the cash reserve ratio by 100 points to 3%, marking a front-loaded easing cycle that shifted its stance from accommodative to neutral.
  • Several state-owned and private banks, including Canara Bank, Punjab National Bank, Bank of Baroda, Union Bank of India and Indian Overseas Bank, have cut their benchmark lending rates by up to 50 basis points, passing on the policy easing.
  • The CRR cut is expected to release around Rs 2.5 lakh crore into the banking system by year-end, adding to the durable liquidity surplus of Rs 9.5 lakh crore created since January.
  • The RBI projects real GDP growth of 6.5% for the 2025–26 fiscal year and has revised its consumer price index forecast down to 3.7% from 4.0% as inflation moderates.
  • Analysts caution that muted household spending, restrained fiscal consolidation and tepid corporate investment could weaken the transmission of monetary easing into stronger economic demand.