Daijiworld Media Network – Mumbai
Mumbai, Jun 6: In a significant policy move aimed at supporting economic growth, the Reserve Bank of India (RBI) has reduced the repo rate by 50 basis points, bringing it down to 5.5%. The announcement was made following the conclusion of the three-day bi-monthly Monetary Policy Committee (MPC) meeting, chaired by RBI Governor Sanjay Malhotra.
The decision, which comes amid signs of easing inflation, is expected to bring relief to borrowers, particularly homebuyers, as it could lead to a reduction in EMIs for long-term loans. With inflation now well within the RBI’s comfort range, the central bank has taken a more accommodative stance to spur domestic demand.
Governor Malhotra noted that despite a fragile global economic environment and revised downwards trade projections, the Indian economy remains resilient. Highlighting strong balance sheets across five major sectors, he stated that India continues to be a promising destination for both domestic and international investors. “Our economy is already growing at a fast pace, and we aim to grow faster,” he remarked.
Retail inflation for the current financial year is now projected at 3.7%, down from the earlier estimate of 4%. Latest government figures reveal that inflation declined to 3.16% in April from 3.34% in March. The RBI expects food inflation to remain subdued and core inflation to stay benign in the coming quarters.
The central bank has maintained the GDP growth projection at 6.5% for the current fiscal, with quarterly growth estimates ranging from 2.9% in the first quarter to 4.4% in the final quarter. Other indicators, including industrial activity and services sector performance, also point to a steady economic trajectory. Rural demand is stable, and urban demand shows signs of improvement, the governor added.
In another major move, the RBI announced a reduction in the Cash Reserve Ratio (CRR) by 100 basis points, which will infuse Rs 2.5 lakh crore of liquidity into the banking system. This step is likely to boost lending capacity among banks and support credit flow to productive sectors.
India’s foreign exchange reserves currently stand at an impressive $691 billion, enough to cover over 11 months of goods imports, further strengthening the country’s economic fundamentals.
The rate cut is expected to inject fresh momentum into the real estate sector, with experts predicting a rise in homebuyer sentiment and an uptick in residential property sales, particularly in urban and mid-income segments. Developers, too, may feel encouraged to launch new projects, given the improved affordability and stronger buyer interest.
The June announcement follows an earlier repo rate cut of 25 basis points in April, reinforcing the RBI’s commitment to balancing growth and inflation in a challenging global context.