The Reserve Bank of India (RBI), in a significant monetary policy announcement on June 6, 2025, implemented a series of measures aimed at stimulating economic growth while managing inflation. Led by Governor Sanjay Malhotra, the Monetary Policy Committee (MPC) decided to cut the benchmark repo rate by a substantial 50 basis points, reduce the Cash Reserve Ratio (CRR) by 100 basis points, and shift the policy stance to "neutral".

The repo rate, the rate at which the RBI lends to commercial banks, was reduced to 5.50% from 6.00%. This marked the third consecutive rate cut in 2025, following 25 basis point reductions each in February and April, bringing the total reduction in the first half of the year to 100 basis points. The primary driver for this aggressive easing was the continued moderation in retail inflation, which fell to 3.16% in April 2025, comfortably below the RBI's 4% target. Governor Malhotra highlighted that the evolving growth-inflation dynamics warranted "not just continued policy easing, but also front-loading the rate cuts to support growth."

In a concurrent move to enhance liquidity in the banking system, the MPC announced a 100 basis point cut in the Cash Reserve Ratio (CRR), bringing it down from 4% to 3%. This reduction is expected to release approximately Rs 2.5 lakh crore into the financial system. The CRR cut will be implemented in four equal tranches of 25 basis points each, effective from the fortnights beginning September 6, October 4, November 1, and November 29, 2025.

The MPC also decided to change its monetary policy stance from "accommodative" to "neutral". Governor Malhotra explained that this shift indicates that after the cumulative 100 basis point repo rate cut since February 2025, the space for further monetary support is now limited. Future policy decisions will be carefully data-dependent, assessing incoming information to strike the right balance between growth and inflation. The decision for the 50 bps rate cut was passed with a 5:1 majority in the MPC.

Reflecting the improved inflation scenario, the RBI revised its Consumer Price Index (CPI) inflation forecast for the fiscal year 2025-26 downwards to 3.7% from the earlier projection of 4%. Quarterly inflation projections are Q1 at 2.9%, Q2 at 3.4%, Q3 at 3.9%, and Q4 at 4.4%. Despite these measures and a challenging global environment, the RBI retained its GDP growth forecast for India for FY2025-26 at 6.5%. The quarterly GDP growth projections stand at 6.5% for Q1, 6.7% for Q2, 6.6% for Q3, and 6.3% for Q4. This comes after India's economy grew 6.5% in FY25, with Q4 FY25 growth accelerating to 7.4%.

The real estate sector, particularly, welcomed the RBI's moves. Realtors' apex body CREDAI, through its President Shekhar G Patel, lauded the 50 bps repo rate cut as a "bold and timely step" expected to boost residential property sales, especially in the mid-income and affordable housing segments. Patel noted that lower lending rates would enhance home loan affordability, improve buyer sentiment, and encourage first-time homebuyers. The cumulative 100 basis point reduction over the last six months was seen as a strategic move to support a sector that has faced demand and supply pressures. However, some property consultants reported a decline in housing sales across major cities in the January-March 2025 quarter compared to the previous year.

For home loan borrowers, the rate cuts translate into significant savings. EMIs are expected to decrease, or loan tenures could shorten. For example, on a Rs 50 lakh home loan with a 20-year tenure, a 100 bps rate reduction could lower the EMI by approximately Rs 3,100-Rs 3,164, leading to total interest savings of around Rs 7.47 lakh if the tenure remains unchanged. Alternatively, keeping the EMI constant could reduce the loan tenure by nearly three years, resulting in even larger interest savings of about Rs 15.44 lakh. Experts advise borrowers with loans under older regimes like MCLR, base rate, or BPLR to consider switching to an External Benchmark Lending Rate (EBLR) linked loan for quicker transmission of rate cut benefits.

The financial markets reacted positively to the RBI's announcements. Benchmark indices Sensex and Nifty surged, with the Sensex climbing over 800 points and the Nifty surpassing the 25,000 mark. Rate-sensitive sectors such as banking, financials, auto, and realty stocks led the rally, with the Nifty Realty index jumping over 2% and the Nifty Bank index hitting a 52-week high. Market experts viewed the rate cut as positive for growth, though some noted potential near-term pressure on bank margins, which could be cushioned by the CRR cut improving liquidity.

These domestic policy actions occur as India continues its trajectory to become the world's fourth-largest economy by the end of 2025 (FY2025-26), having more than doubled its nominal GDP since 2014. The RBI's easing stance contrasts with some global central banks; the US Federal Reserve has maintained its rates, the Bank of England held steady after a May cut, while Australia and New Zealand saw rate cuts in May. Meanwhile, India is also engaged in high-level trade talks with the U.S. aiming to finalize tariff cuts.

In summary, the Reserve Bank of India's decisive monetary easing, through substantial repo rate and CRR reductions, along with a recalibrated policy stance, reflects a proactive approach to bolster economic growth. These measures are anticipated to lower borrowing costs, improve liquidity, support the housing sector, and provide a fillip to overall market sentiment, all while keeping a vigilant eye on the inflation trajectory.