The Reserve Bank of India (RBI) made headlines on April 9, 2025, with its Monetary Policy Committee (MPC) announcing a 25 basis points (bps) cut in the repo rate, bringing it down to 6%. This marks the second consecutive rate cut this year, following a similar 25 bps reduction in February 2025. Alongside this, the RBI shifted its monetary policy stance from neutral to accommodative, signaling potential for further rate reductions. With inflation cooling and global economic uncertainties looming, this move aims to boost growth while maintaining liquidity in the system.

In this blog, we’ll break down what this repo rate cut and accommodative stance mean, how they impact key sectors like banking, real estate, and consumer goods, and what investors should keep an eye on in the coming months.

Understanding the Repo Rate Cut and Accommodative Stance

The repo rate is the interest rate at which the RBI lends money to commercial banks to meet short-term funding needs. A lower repo rate reduces borrowing costs for banks, which can then pass on these benefits to consumers and businesses through cheaper loans. The recent cut from 6.25% to 6% is a response to several factors:

Cooling Inflation: India’s Consumer Price Index (CPI) inflation dropped to a 67-month low of 3.34% in March 2025, driven by falling food prices (2.9% year-on-year). With inflation well below the RBI’s 4% target, the central bank has room to prioritize growth.

Global Trade Uncertainties: The imposition of “reciprocal” tariffs by the U.S. under President Donald Trump, effective April 9, 2025, has raised concerns about imported inflation and slower economic growth.

This policy shift is expected to have far-reaching effects on the economy, particularly in banking, real estate, and consumer goods.

Let’s dive into the sectoral impacts.

Impact on Key Sectors

1. Banking Sector: Lower Rates, Higher Liquidity

The banking sector is the first to feel the ripple effects of a repo rate cut, as it directly influences lending and deposit rates.

Major banks like State Bank of India (SBI), Bank of India (BoI), and Indian Bank have already reduced their lending rates by 25 bps. For instance, SBI slashed its Repo Linked Lending Rate (RLLR) to 8.25% and External Benchmark Based Lending Rate (EBLR) to 8.65%, effective April 15, 2025. This translates to lower Equated Monthly Installments (EMIs) for borrowers. The RBI’s accommodative stance ensures ample liquidity in the banking system, which should improve loan disbursements. Kotak Mahindra Bank’s Chief Economist, Upasna Bhardwaj, noted that recent liquidity injections will aid faster rate transmission.

2. Real Estate: A Boost for Homebuyers and Developers

The real estate sector, highly sensitive to interest rates, is poised for a significant uplift from the repo rate cut. Home loan rates are dipping, with SBI and BoI offering rates as low as 7.9% based on credit scores.

3. Consumer Goods: Driving Demand Through Easier Credit

The consumer goods sector, encompassing durables like appliances, electronics, and automobiles, stands to gain from increased consumer spending fueled by cheaper credit.

Lower EMIs on home, auto, and personal loans leave consumers with more disposable income, boosting demand for consumer durables.

Conclusion: A Growth-Oriented Move with Cautious Optimism

The RBI’s 25 bps repo rate cut and shift to an accommodative stance in April 2025 reflect a proactive approach to stimulate growth amid global uncertainties. For consumers, this translates to lower EMIs and easier access to credit, boosting sectors like real estate and consumer goods.

Banks, while benefiting from higher loan demand, must navigate margin pressures and deposit rate cuts.

Investors should approach this environment with cautious optimism. Real estate and consumer goods offer growth potential, but global trade risks and inflation dynamics require close monitoring. By focusing on companies with strong fundamentals and domestic exposure, investors can capitalize on the RBI’s growth-oriented policy while managing risks.

Stay tuned to economic indicators, bank lending trends, and global developments with Bonanza Wealth to make informed investment decisions. The RBI’s next moves in June and August 2025 will be critical in shaping India’s economic trajectory.