RBI Repo Rate Cut to Improve Credit Affordability, Boost Big Purchases The move is expected to boost sectors such as real estate, which depends heavily on loans for its consumers to make a purchase.
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The Reserve Bank of India (RBI) has announced to cut the repo rate by 25 points, and stakeholders particularly from the industries that use credit as its major driver, have welcomed the decision with optimism.
The move is expected to boost sectors such as real estate, which depends heavily on loans for its consumers to make a purchase. According to a Knight Frank survey, as much as 79 per cent of prospective buyers in India in the urban demographic, prefer to purchase using credit financing.
Dr Niranjan Hiranandani, Chairman, National Real Estate Development Council (NAREDCO) said that it is a welcome move by the Reserve Bank of India to reduce its repo rate by 0.25 basis points and after a period of steadiness in the repo rate, this long-awaited and strategic move comes at a crucial time.
"As inflation is now under control, the fiscal deficit remains moderate, and economic growth is expected to accelerate steadily, the reduction in the repo rate signals a renewed sense of resilience. Additionally, it assures us that despite external geopolitical uncertainties, our domestic economic climate keeps markets efficient and demand robust. Combined with the tax benefits announced in the FY26 budget for the middle class, this policy change will boost sales velocity. Thus, lowered interest rates will further nudge homebuyers to buy an ownership home with an upgraded lifestyle," said Hiranandani.
Lakshmanan V, Group President and Head - Treasury at Federal Bank said that today's outcome sets the stage for rate cut expectations in April, unless the Inflation and global macro play havoc.
The rate cut comes at a time of global macro environment complexities involving fund outflows and uncertainties surrounding the shaping up of the US trade policies under the new President Donald J Trump.
"The MPC was on reasonably expected lines on all counts - Rate cut, stance, and statement on liquidity measures. This decision in my view was a logical extension to the liquidity measures taken in Jan, along with clear assurances given by RBI to support liquidity whenever necessitated going forward," said Lakshmanan.
The much-expected rate cut is the first in close to five years and comes after the Union Budget's tax relief. Experts opine that this should make borrowing cheaper and spur investments and spending.
Vijay Kuppa, CEO, InCred Money said that the rate is a big move, and one that signals a shift in focus while supporting growth and keeping inflation in check.
"For individuals, this means lower EMIs on home and business loans, making big-ticket purchases more attractive. But on the flip side, fixed deposit rates may soften, discouraging savings and pushing people to either spend or invest in equities. The stock market, already buoyant, could see further gains as liquidity improves," said Kuppa.
Kuppa added that RBI is also staying neutral on its policy stance, watching global risks carefully before making further moves.
