RBI slashes rates, pegs growth at 6.5%

New Delhi

In a landmark move, the Reserve Bank of India (RBI) has cut the repo rate by 50 basis points to 5.5%, while projecting India's GDP growth for 2025-26 at 6.5%. The central bank also revised the inflation forecast downward to 3.7%, citing broad-based moderation in prices and strong agricultural output.

Announcing the decisions after the monetary policy meeting, RBI Governor Sanjay Malhotra said the domestic economy is showing resilience, supported by a healthy agriculture sector, gradually improving industrial activity, and continued strength in services.

Quarter-wise growth projections stand at 6.5% in Q1, 6.7% in Q2, 6.6% in Q3, and 6.3% in Q4. Rural demand remains steady while urban consumption is improving, driven by rising discretionary spending and stronger investment momentum.

The repo rate cut, the second in quick succession, brings total easing to 100 basis points since February. The policy stance has now shifted from “accommodative” to “neutral,” enabling the RBI to better balance growth and inflation dynamics.

Experts believe the rate cut will lower EMIs for home, personal, and business loans, providing relief to borrowers and spurring real estate demand, particularly in mid-income and affordable segments.

Inflation has declined to a six-year low of 3.2% in April, led by falling food prices. The RBI forecasts inflation to remain below the 4% target throughout the year, with a benign outlook across major commodity groups.

In another key move, the RBI raised the loan-to-value (LTV) ratio for gold loans up to ₹2.5 lakh from 75% to 85%, making credit more accessible to small borrowers. Credit appraisal norms and end-use monitoring have also been eased for such loans.

While the economic outlook remains positive, Malhotra warned of risks from global trade uncertainties, weather disruptions, and geopolitical tensions.

“With strong fundamentals and easing inflation, India remains the world’s fastest-growing major economy,” Malhotra said, adding that the RBI will remain vigilant to emerging risks while supporting sustainable growth.