Markets hope for a 25 bps cut in repo rate as RBI monetary policy committee begins 3-day meet

With the Reserve Bank of India’s (RBI) monetary policy committee deliberations underway, investors expect a 25 basis point rate cut, changes in certain policy stances and more clarity on the liquidity of the banking system. This could mean a further cut in home loan EMIs.

This February, the RBI returned from a long hiatus—almost five years—cutting the repo rate. Further reductions in the short-term lending rate are expected.

The Indian central bank is expected to buy bonds in April after infusing a bit over $60 billion into the country’s banking ecosystem since 2024 by way of buying debts and forex swaps.

With the latest global trade war triggered by Donald Trump-induced tariffs, the country’s GDP growth is expected to be hampered by 20 to 40 basis points, leading market experts to bet on more rate cuts by the RBI. Some eye at least 75 bps rate cuts to help revive the slowing local demand at the onset of a weakening rupee.

Last week, the US slapped a 26 per cent reciprocal tariff on India, quickly urging giants like Citi and Goldman Sachs to lower the country’s growth outlook, versus the RBI forecast of 6.7 per cent economic growth in fiscal 2025-2026.

By Wednesday, when the three-day meeting of the RBI MPC ends, many in the market expect the repo rate to be cut by 25 bps to 6 per cent. However, given the latest developments with the tariff war, a bigger cut may happen either now or later in the year.

The RBI might also tweak its growth estimates, following the 54th meeting of the MPC.

Bank of Baroda Chief Economist Madan Sabnavis is confident of a 25 bps rate cut this time. “While it does look like conditions are rather clear for another 25 bps cut in repo rate this time with the inflation prospects being benign and liquidity having settled down, it is also expected that the stance will change to accommodative, meaning...that there could be more rate cuts in the offing during the course of the year,” Sabnavis told agencies.

Experts in sectors like real estate are also looking forward to the repo rate cut. “We definitely hope to see further lower interest rates which will provide impetus to not just real estate and housing demand but across industries. The rate cut would also strengthen market confidence, infuse much-needed liquidity and greater investment activity into the real estate sector,” said Ramani Sastri, Chairman and MD of Sterling Developers.

A repo rate cut reduces the home loan interest rates, urging more first-time buyers to invest in new property. Essentially, it reduces the EMI load to the end consumer.

The decisions of the monetary policy committee are expected to be announced on Wednesday.

Business