Overview

• The central bank trimmed its key policy rate by 50 basis points to 5.5%, completing a 100-bps easing cycle since February.
• A 100-bps cut in the cash reserve ratio freed about ₹2.5 lakh crore of surplus funds for banks to deploy as loans.
• Policy stance shifted to neutral, indicating a pause likely in August and a projected next repo cut in December.
• Banks including Bank of Baroda, Punjab National Bank and HDFC Bank have reduced their lending benchmarks, lowering home and auto loan rates.
• Equity markets jumped nearly 1% on the announcement and strategists foresee stronger credit growth and consumer demand in housing, autos and FMCG.