RBI's Third Consecutive Rate Cut Under Governor Sanjay Malhotra: What’s Driving the Aggressive Easing?

In a hat-trick rate cut move, the Reserve Bank of India has slashed interest rate by 50 basis points to 5.5 per cent during the central bank's MPC meet convened under RBI Governor Sanjay Malhotra.

According to Malhotra's statement after the second Monetary Policy Committee (MPC) meeting of FY2025–26, who since taking on the position of RBI Governor has made concesutively made rate cuts, said that era is nearing its end.

The central bank had delivered two back-to-back 25 BPS cuts earlier this year. The third consecutive reduction (50 BPS) underscores a deliberate strategy to revive growth without compromising price stability. 

In the Monetary Policy Committee (MPC) chaired by RBI Governor Sanjay Malhotra in February, the central bank reduced the key benchmark lending rate (repo) by 25 bps points each in February and April this year on the recommendations of the governor-headed MPC.

This decision came shortly after the Union Budget 2025, where Finance Minister Nirmala Sitharaman introduced key tax reforms meant at stimulating consumption and reviving economic growth in attempt to ease inflation and proliferate the pace of development.   

On April 9, 2025, RBI Governor yet again announced a 25 bps rate cut amid an environment of rising global economic uncertainities led by Trump's liberation day traiff threats

In the same period, Malhotra said, "The global economic outlook is fast changing. The recent trade tariff-related measures have exacerbated uncertainties clouding the economic outlook across regions." 

Coming to the present-day secnario, India is progressing well on both inflation and growth fronts. Further, he said, that as global environment remains uncertain, it becomes more pertinent to focus on domestic growth, said Malhotra.

"Today's MPC actions should be seen as a step to propel growth," he said.  

Key Takeaways From RBI's MPC Meet

Jumbo rate cut of 50 basis points; repo rate at 5.5% now. 
Alteration  in stance to 'Neutral' from 'Accommodative'. 
FY26 CPI Inflation projection dowgraded to 3.7% from 4%. 
CRR cut by 100 bps, at 3% now versus 4%.
FY26 GDP growth projection remains same at 6.5%.

Responding to India change in stance to neutral from accomodative and interest rate cut, billionaire banker Uday Kotak, said, "Monetary policy: bold and strategic. 50 bps rate cut, 100 bps CRR cut, move from  accommodative stance to neutral. Nuanced combination of policy measures."

Markets opened cautiously in anticipation of the policy announcement. Early morning trade saw the Sensex dip by 159.93 points to 81,282.11, and the Nifty fall by 27.65 points to 24,723.25.

However, once the sharper-than-expected 50 BPS cut was confirmed, markets rebounded sharply. At 11:16 am, Sensex was up 0.88 per cent at 82,160.68, while Nifty 50 rose 0.98 per cent at 24,979.70.