The Reserve Bank of India (RBI) just delivered a massive “one-two monetary punch,” unleashing over ₹2.5 lakh crore into the banking system to supercharge the economy. This powerful move involves two key actions:
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- Cash Reserve Ratio (CRR) Slashed: The CRR, the percentage of deposits banks must hold with the RBI, has been cut by a full 100 basis points to 3% from 4%. This will be implemented in four staggered phases, directly freeing up more money for banks to lend.
- Repo Rate Cut: The benchmark repo rate, at which the RBI lends to banks, has been reduced by 50 basis points to 5.5%. This is the third consecutive repo rate cut this year, totaling 100 basis points in 2025 alone.
Why These Actions Matter
RBI Governor Sanjay Malhotra explained that these measures are a “liquidity infusion designed to reduce banks’ funding costs and stimulate credit growth.” Simply put, they’re designed to make it cheaper for banks to operate and easier for them to lend.
The impact is significant:
- More Lending Power for Banks: With the CRR cut, for every ₹100 in deposits, banks now need to set aside only ₹3, instead of ₹4. This immediately frees up substantial funds for lending or investment.
- Lower Borrowing Costs for You: The repo rate cut directly lowers the cost of borrowing for banks, which should translate into lower EMIs for home loans and cheaper personal and auto loans for consumers.
- Boost for the Economy: This infusion of liquidity and lower interest rates are expected to kickstart lending to consumers and businesses, especially in key sectors like real estate, auto, and small business credit, ultimately driving economic expansion.
“BrahMos, Pinaka, Akash Activated Together”
One market observer aptly compared the RBI’s coordinated actions to “activating BrahMos, Pinaka, and Akash together,” referencing India’s advanced multi-pronged defense systems. This highlights the unprecedented scale and strategic coordination behind the RBI’s latest monetary policy.
With retail inflation cooling to 3.16% and the GDP growth forecast for FY26 holding steady at 6.5%, the RBI is clearly signaling strong support for economic growth.
