The Reserve Bank of India (RBI) on Friday took bold decisions in its second bi-monthly monetary policy of the current fiscal (FY26). The RBI Governor Sanjay Malhotra-led Monetary Policy Committee (MPC) decided to cut the repo rate by 50 basis points (bps) to 5.50% from 6.00% earlier. This is the central bank’s third consecutive repo rate cut.

While it lowered the repo rate by 50 basis points (bps), the third cut in a row, front-loading them on the back of softening inflation, it also went for a 100 bps cut in the cash reserve ratio (CRR).

The MPC also decided to change the policy stance to ‘Neutral’ from ‘Accommodative’, RBI Governor Sanjay Malhotra announced in his monetary policy speech.

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According to brokerages, the softening inflation trends which are expected to remain within or below the tolerance limit and a likely demand recovery can be viewed as positive. The RBI has revised its inflation forecast for FY26 downwards to 3.7% vs. 4% earlier, while maintaining its GDP growth forecast at 6.5% for FY26.

“Another surprise came in the form of a CRR cut of 100bps in four tranches, effective from Sep’25, should provide further liquidity boost. This will support credit growth for banks, especially during H2FY26, characterised by the festive season. The CRR cut would release primary liquidity of about ₹2.5 lakh crore to the banking system by Dec’25. We view this as a positive development for banks,” said Axis Securities.