Quote on RBI Monetary Policy by Mr. Amit Bivalkar, Founder Director at Sapient Finserv
Below the Quote on RBI Monetary Policy by Mr. Amit Bivalkar, Founder Director at Sapient Finserv
The Reserve Bank of India (RBI) has cut the repo rate by 50 basis points, bringing it down from 6% to 5.5%. This cut is bigger than expected. Most people thought the RBI would reduce the rate by only 25 basis points. This move marks a total of 100 basis points cut in interest rates since February 2025. It is aimed at supporting the economy by making loans cheaper and improving liquidity.
What does this mean for borrowers?
The repo rate is the rate at which the RBI lends money to banks. When it goes down, banks usually lower the interest rates they charge customers. This means personal, home, and business loans could become cheaper, and people may pay lower EMIs. It’s good news for anyone with a loan or looking to borrow.
Change in policy stance
The RBI has changed its policy stance from “accommodative” to “neutral.” This means the RBI is now more cautious and will not cut rates further unless there is a strong reason. They are now focused on watching how the economy performs from here.
Looking ahead
The RBI said it will closely track economic data and developments around the world. The focus will be on finding the right balance between helping the economy grow and keeping inflation under control.
Global situation
The RBI’s decision comes at a time when the global economy is facing challenges. One key issue is the renewed trade tensions caused by US President Donald Trump’s tariff policies. This has increased uncertainty in the world economy, and the RBI is taking that into account.
Liquidity support: CRR cut
Apart from the repo rate cut, the RBI has also reduced the Cash Reserve Ratio (CRR) by 1 percentage point, from 4% to 3%. This reduction will happen in four steps between September and November 2025, with a 0.25% cut each month. This move is expected to release around Rs.2.5 lakh crore into the banking system, giving banks more money to lend.
Summary
The RBI has taken strong steps to support the Indian economy by cutting interest rates and increasing liquidity. However, it has also signaled that further rate cuts may not happen soon. The RBI will now watch inflation and global risks carefully before making its next move.
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