RBI cuts rate by 25bps amid tariff war; here's how experts interpret it

The repo rate cut by the RBI reinforces the central bank's commitment to support economic growth

The Reserve Bank of India (RBI) governor Sanjay Malhotra, on Wednesday, April 9, 2025, announced to cut the repo rate by 25 basis points (bps), bringing it down to 6 per cent from 6.25 per cent. The RBI's Monetary Policy Committee (MPC) also decided to change the policy stance to 'accommodative' from 'neutral'.  This was the second consecutive rate cut announced by the central bank, which comes amid escalating trade war worries between the US and rest of the world. 

  The RBI decision aligned with market expectations as market analysts welcomed the move, calling it well-timed. Here’s how the market analysts interpret the RBI’s rate cut move: 

  Naveen Kulkarni, chief investment officer, Axis Securities PMS:

The rate cut clears the way for further rate cuts in the upcoming meetings. During a rate easing cycle, banks generally witness an improvement in their current account-savings account (CASA) ratios. However, this has not been the case in the March 2025 quarter (Q4 FY25), with deposit growth being led by both CASA and term deposits, based on the provisional updates released by banks thus far.  

Regarding margins for banks, we expect the full impact of the rate cut to reflect from Q1FY26, with a partial impact visible in Q4. We believe NBFCs like Bajaj Finance, Shriram Finance, SBI Cards and Cholamandalam Investment & Finance would benefit not only from the rate cuts but also from the RBI’s decision to roll back the higher risk weight on bank loans to NBFCs. Amongst banks, we prefer large private banks like HDFC Bank, Kotak Bank, and ICICI Bank. 

Also Read: RBI cuts repo rate by 25 bps to 6%, lowers FY26 GDP growth forecast to 6.5%

   Jigar Trivedi, senior analyst, Reliance Securities:

A 25 basis points rate cut by RBI is a welcome and a timely move. It has reinforced the central bank's commitment to support economic growth, especially at a time when inflation appears to be within manageable limits. A lower interest rate environment has always provided relief to businesses and consumers alike, potentially spurring credit demand, investments, and job creation. Rate cuts amidst tariff turmoil also signal that RBI sees enough macroeconomic stability to continue with an accommodative stance. 

  However, we must ensure that this liquidity gets translated into tangible gains for sectors that need it most, particularly MSMEs, housing, and infrastructure. The economy should realise the full benefits of lower rates through policy support and sustained reform.  Also Read: RBI cuts repo rate further by 25 bps to 6%; a look at key policy rates 

  Aamar Deo Singh, senior vice president for research, Angel One:

The RBI decision signals a clear intent to support growth amid rising global uncertainties. With inflationary pressures easing—largely due to lower crude and food prices—and downside risks to growth becoming more pronounced post the recent US tariff hikes, this policy move was timely and expected.  

The change in stance strengthens the case for a continued easing cycle. We expect this to translate into lower borrowing costs, particularly benefiting rate-sensitive sectors such as housing, automobiles, and MSMEs. Real estate, in particular, stands to gain as improved affordability may drive homebuyer sentiment and spur new demand.

  Overall, the policy action reflects a calibrated approach—balancing growth support with macroeconomic stability—and sets the tone for a data-driven, accommodative monetary trajectory in the months ahead.

  Mahendra Jajoo, chief investment office for fixed income, Mirae Asset Investment Managers:

The policy move paves the runway for continued positive momentum in fixed-income markets. While the risk of a global disruption remains in view of the ongoing developments on tariffs, the guidance is for further cuts in forthcoming policies. 

  Bond yields remained slightly higher immediately after the policy announcement as the rates eased significantly in the prelude but are expected to continue to soften going forward. It would seem that in the current environment of uncertainty, the central bank is going to do the heavy lifting yet again, as it did during the Covid disruption. That suggests a supportive environment for fixed income in the immediate term.