RBI’s repo cut to aid consumption, investment and funding cost, bankers say

The Reserve Bank of India’s (RBI) 25 basis points (bps) repo rate cut will support consumption, investment, and reduce funding costs for corporates, according to senior bankers.

State Bank of India (SBI) Chairman CS Setty emphasized that the decision to cut rates while keeping the door open for further easing helps cushion the economy against unexpected shocks or external headwinds. This move reinforces the structural drivers of a ‘higher-for-longer’ growth trajectory across investment, credit and consumption.

Concurrent liquidity-management steps were highlighted as measures designed to anchor money-market rates and lower borrowing costs. Combining the rate cut, neutral stance, and targeted liquidity interventions would sustain economic momentum while safeguarding price and financial stability.

Housing, MSMEs to gain

Indian Overseas Bank MD & CEO Ajay Kumar Srivastava indicated the rate reduction is expected to ease borrowing costs, spur demand in housing and real estate, support MSMEs, and sustain growth in personal and auto loans. Bank credit growth remains healthy at 11%, with overall credit from bank and non-bank sources growing 13.1%. RBI’s ₹1 lakh crore OMO purchases and the 3-year USD/INR buy-sell swap will support liquidity and monetary transmission, encouraging domestic investment and deepening financial access.

Long-term swap

Manappuram Finance MD & Chairman V.P. Nandakumar observed that with price pressures stabilizing and liquidity improving, the rate cut aims to lift consumption and investment amid moderated growth momentum. Lower policy rates typically reduce borrowing costs for home loans, autos, MSME credit, and working-capital financing, helping households and small businesses manage cash flows more comfortably, though full transmission may take weeks.

The introduction of the three-year rupee-dollar sell swap was noted as an additional layer of support. By infusing longer-term liquidity without unsettling short-term rates, the RBI ensures banks have room to lend more comfortably. This should further lower funding costs and improve liquidity conditions for consumers and small businesses.

From a broader economic perspective, the rate cut strengthens the pro-growth environment. Bond yields generally soften, credit demand improves, and sectors like real estate, autos, and NBFCs benefit from lower EMIs and improved borrowing conditions.

Published on December 5, 2025