RBI cuts rates by 50 bps, shifts stance to ‘neutral’

The Reserve Bank of India (RBI) on Friday surprised with a bigger-than-expected 50 basis points (bps) cut in interest rate, delivering a booster shot to spur the economy amid global trade disruptions.

This marks RBI governor Sanjay Malhotra’s third consecutive and largest rate cut since taking office in December last year. On basis point is one-hundredth of a percentage point

The RBI’s six-member rate-setting monetary policy committee voted to cut the repurchase rate to 5.5%, while changing its stance to “neutral” from “accommodative.”

RBI also announced a phased 100 bps cut in the cash reserve ratio (CRR).

The CRR, or the share of deposits banks must hold with RBI, will be cut from 4% to 3% in four tranches of 25 bps each, beginning September. The move is expected to infuse ₹2.5 trillion into the banking system over the coming months.

The Nifty Bank jumped 1% amid strong gains in financial stocks, with the broader benchmarks Sensex and Nifty also rising about 1% following the announcement.

Malhotra said inflation has softened well below target, and with short-term trends looking favorable, the RBI is confident of meeting its goal durably, though future moves will hinge on incoming data.

“The Indian economy presents picture of strength, stability and opportunity,” Malhotra said, adding that India is growing at a very fast pace and “aspire to grow at a higher rate.”

India’s central bank cut rates as growth eased to 6.5% in the year ended March, prompting policymakers to act amid growing global uncertainties.

With US tariffs under President Donald Trump fueling trade tensions and concerns mounting over a global growth slump, pressure is building for further policy easing to help India maintain its lead as the world’s fastest-growing major economy.

A steady decline in consumer inflation has given RBI room to manoeuvre toward boosting domestic demand. Headline inflation has stayed below the 4% target for three straight months, and the outlook remains favorable, aided by soft oil prices and an early monsoon that could help contain food costs.