RBI slashes repo rate, injects $16B liquidity: Experts decode India’s ‘Goldilocks’ economy

The Reserve Bank of India cut its key repo rate and left the door open for further easing as it took steps to boost banking-sector liquidity by up to $16 billion to support a ‘goldilocks’ economy. The Tech Panda asked industry experts what this means.

V P Nandakumar, MD and Chairman, Manappuram Finance LTD., says the RBI’s 25-basis-point rate cut, which brings the repo rate down to 5.25%, comes at a time when inflation is easing and the broader economy needs a little more support.

“From a wider economic standpoint, the cut strengthens the pro-growth environment. Bond yields typically soften, credit demand tends to improve and sectors that rely heavily on financing—such as real estate, autos and NBFCs—benefit from lower EMIs and better borrowing conditions.” — V P Nandakumar, MD and Chairman, Manappuram Finance LTD.

“With price pressures gradually stabilising and liquidity improving, the move aims to lift consumption and investment at a moment when the growth momentum has moderated. Lower policy rates usually work their way into borrowing costs across home loans, autos, MSME credit and working-capital financing, helping households and small businesses manage their cash flows more comfortably, even though the full transmission will take a few weeks.

“The introduction of the three-year rupee-dollar sell swap adds another layer of support. By infusing longer-term liquidity without unsettling short-term rates, the RBI is ensuring that banks have the room to lend more comfortably. This should help lower funding costs further and improve liquidity conditions for both consumers and small businesses.

“From a wider economic standpoint, the cut strengthens the pro-growth environment. Bond yields typically soften, credit demand tends to improve and sectors that rely heavily on financing—such as real estate, autos and NBFCs—benefit from lower EMIs and better borrowing conditions. Savers may see deposit rates adjust downward, but that is part of the broader cycle as the financial system aligns with lower benchmark rates.

“Overall, the RBI’s decision is a measured and timely step. With inflation trending toward the comfort zone and certain parts of the economy still operating below capacity, this rate cut helps reinforce confidence and supports a steady, broad-based recovery as the country moves into FY27.”

Sarvjit Singh Samra, MD & CEO, Capital Small Finance Bank, says the RBI’s decision to cut the repo rate by 25 bps to 5.25% with a unanimous 6-0 vote and to announce INR1 lakh crore of OMO bond purchases signals a decisive shift toward supporting growth amid a rare “Goldilocks” phase of low inflation and resilient economic momentum.

“With inflation projections sharply revised downward and GDP estimates upgraded, the policy stance turning affirmatively growth-supportive will ease funding costs and strengthen liquidity across the banking system. For banking industry, this environment enhances the ability to expand credit, better transmission of interest rate cuts and support productive segments of the economy.

“At Capital Small Finance Bank, we expect the rate cut and OMO-driven liquidity infusion to improve portfolio transmission, and create greater room to deepen lending to MSMEs, retail borrowers, and rural economy. The neutral stance also brings policy predictability, enabling us to plan asset-liability strategies with more precision. Overall, today’s policy measures position the financial system and Capital Small Finance Bank in particular to participate more strongly in India’s next leg of growth in FY26.”

Mahek Modi, Whole-Time Director & CFO of Modis Navnirman Limited, says the RBI’s decision comes at an opportune moment for the real estate sector and the broader economy.

“With inflation easing and credit flows improving, this policy move strengthens affordability and further reinforces homebuyer confidence as we step into 2026. The cumulative rate cuts over the past year have already improved sentiment across mid-income and premium segments, and this additional easing is expected to accelerate purchase decisions that were previously deferred due to elevated price pressures.

“Backed by robust demand trends in key metros and a rising preference for quality living, we anticipate sustained traction across both residential and commercial categories. Lower mortgage rates, combined with stable macroeconomic indicators, will not only support end-users but also enable developers to plan future launches with greater clarity. Overall, this calibrated monetary stance by the RBI sets a positive tone for continued sectoral growth and positions the real estate market for a strong 2026.”

Kunal Shah, Co-founder, SURE, says, “As expected, RBI MPC has delivered a dovish cut in interest rates, acknowledging that the inflation trend is much lower, if we take out the impact of gold prices, realised inflation this year is only 1.5-2.0%. Leaving the rooms for one more cut in future if growth slows down.

“For banks, the rate cut may compress lending margins in the short term, but it is also expected to stimulate higher credit demand, particularly in home loans, supporting overall portfolio growth. With rates continuing to soften, 2026 is shaping up to be more favourable for both borrowers and lenders.” — Kunal Shah, Co-founder, SURE

“The cut is timely and will bring relief for homebuyers,  lowering EMIs and reducing total interest outflow. For a home loan of ?50 lakhs, borrowers could now save around *?1.80 lakh over the 20y tenure, further improving affordability and boosting housing demand.

“For banks, the rate cut may compress lending margins in the short term, but it is also expected to stimulate higher credit demand, particularly in home loans, supporting overall portfolio growth. With rates continuing to soften, 2026 is shaping up to be more favourable for both borrowers and lenders.”

Reeza Sebastian Karimpanal, Chief Revenue Officer, Residential, Embassy Developments Ltd., said, “With inflation softening and the central bank reaffirming confidence in India’s economic trajectory, the current rate cut brings much-needed clarity and support to the broader real estate ecosystem.

“For developers, improved financing conditions and stronger liquidity sentiment are encouraging. This stability is likely to accelerate project momentum and strengthen demand across key markets. While the luxury segment continues to remain resilient with strong end-user demand, a more accommodative policy backdrop helps unlock broader market participation and long-term planning for the industry. We are also seeing sustained interest from a new generation of homebuyers who are prioritising quality living, integrated amenities, and long-term value creation. Although mid-income and first-time buyers may benefit more directly from lower EMIs, the overall confidence boost supports sentiment across segments, including premium and luxury.”

Amit Prakash, Co-founder & CEO, Urban Money, said, “The 25-basis point reduction in the repo rate comes at a timely moment, strengthening monetary support as domestic fundamentals remain constructive. With growth projections revised upward by global agencies and inflation well-anchored, the move adds incremental support to overall financial conditions. Tax reforms continue to bolster demand, complementing the policy easing. The cut also builds on earlier reductions this year, reinforcing transmission as lending rates trend lower. Financial conditions are expected to improve further as banks align their lending rates with the policy adjustment.”

Ashish Goyal, Co-Founder and Whole Time Director, Fibe, said, “The 25 bps rate cut announced today, taking the total reduction to 125 bps in 2025, signals a strong shift toward supporting growth while keeping inflation in check. The cumulative easing brings down borrowing costs meaningfully, strengthens household purchasing power and gives customers more confidence to plan long-term. Lower rates also create a clear push for higher consumption as everyday credit becomes more accessible, and the cost of major purchases becomes easier to manage.

“The cumulative easing brings down borrowing costs meaningfully, strengthens household purchasing power and gives customers more confidence to plan long-term. Lower rates also create a clear push for higher consumption as everyday credit becomes more accessible, and the cost of major purchases becomes easier to manage.” — Ashish Goyal, Co-Founder and Whole Time Director, Fibe

“Meanwhile, the liquidity actions through large government bond purchases and the three-year dollar rupee swap focus on strengthening the financial system itself. Injecting more than ?1 lakh crore into the economy ensures lenders have the flexibility to extend credit smoothly and prevents any strain on financial conditions. Better liquidity also improves policy transmission, supports small enterprises and stabilises financial markets. Combined with the RBI’s renewed push on customer service and grievance resolution, these steps create a more resilient and customer-centric financial environment that supports broad-based economic momentum.”

Bhavik Khara, Whole Time Director and CFO at Arisinfra Solutions Limited, said, “The RBI’s 25 bps repo-rate cut at the close of 2025 is a timely and decisive boost for India’s real estate and infrastructure ecosystem. At a stage where affordability is a key trigger for demand, this move will meaningfully strengthen home-loan viability and buyer confidence. We expect renewed momentum across premium residential and large infrastructure-led developments as project execution accelerates. At Arisinfra Solutions, this liquidity push reinforces our ability to enable faster, smarter and more sustainable urban development through technology-led construction and infrastructure solutions that deliver enduring, future-ready value.”

Sundeep Mohindru, Founder & Promoter, M1xchange, said, “The RBI’s decision to reduce the repo rate by 25 basis points, supported by a unanimous stance, reflects confidence in the current inflation and growth trajectory. With this move, the cumulative rate reduction in 2025 now stands at 125 basis points, marking a continued shift toward an accommodative policy environment.

“With inflation stabilizing at the lower end of the target band and liquidity being strengthened through OMO purchases and the planned dollar–rupee swap, we expect borrowing conditions to ease further across the financial system. For TReDS, this will encourage deeper participation, more competitive pricing, and quicker access to working capital for MSMEs. As monetary conditions evolve, digital supply chain finance platforms will continue to play a key role in ensuring efficient and timely credit flow to small businesses.”

CA Kinjal Shah, Vice President, Bombay Chartered Accountants’ Society (BCAS), says, “With the 25-basis-point reduction in the repo rate, bringing it to 5.25%, the Reserve Bank of India has delivered four rate cuts in 2025—25 bps each in February and April, a 50-bps cut in June, and 25 bps in December, bringing the cumulative reduction for the year to 125 bps. The decision was unanimous and reflects the RBI’s continued growth-supportive policy stance amid a benign inflation outlook. GST rationalisation has boosted domestic demand, and festival-related spending has further contributed to growth across sectors.

“Liquidity conditions are being addressed through OMO purchases of INR1 lakh crore and a $5 billion dollar–rupee swap in December to inject durable liquidity into the system. Despite global headwinds, the Indian economy has shown resilience and is poised to maintain high growth, with the real GDP outlook for FY26 being revised to 7.3%. The combination of supportive monetary policy, robust domestic demand and growth outlook provides guidance on how credit and financial conditions may evolve over the near term.”