RBI Cuts Repo Rate, Staggers CRR Reduction

The Reserve Bank of India (RBI) has cut its key repo rate by 50 basis points to 5.5%, the third consecutive reduction in 2025 and the lowest since August 2022. Simultaneously, the RBI reduced the cash reserve ratio (CRR) for banks by 100 basis points, to be implemented in staggered tranches, a move expected to inject 2.5 trillion rupees ($29 billion) into the banking system. These actions come as headline inflation fell to a near six-year low of 3.16% in April, below the RBI's 4% target, allowing a focus on supporting economic growth. Despite strong year-on-year GDP growth of 7.4% in the latest quarter, the RBI maintained its full-year growth forecast at 6.5%, suggesting a moderation is anticipated. The central bank also shifted its policy stance from 'accommodative' to 'neutral', indicating a likely end to the current easing cycle. Analysts expect the measures to benefit interest-sensitive sectors, provide relief to banks, and boost both equity and debt markets.