In its June 11 policy review, the Reserve Bank of India (RBI), under Governor Sanjay Malhotra, unveiled its largest interest rate cut in five years, slashing the repo rate by 50 bps to 5.50%, paired with a 100 bps cut in CRR to inject ₹2.5 trillion into the banking system. This aggressive easing signals a strong shift toward growth-oriented policy, with a target GDP growth of 7–8% aimed at tackling job creation for India’s 1.4 billion population. While inflation remains subdued, experts caution that such large rate adjustments may reduce future flexibility and increase market volatility.
The move reflects a clear focus on boosting credit. However, success depends on banks passing on rate cuts and borrowers utilizing them—especially MSMEs, which currently receive only 16% of bank credit. India’s immediate challenge will be reviving urban private investment and consumer demand to complement rural recovery. Most analysts predict no further cuts in FY26, meaning the RBI is positioning now for maximum impact with this decisive action.
